# 97-039/1 (1997-03-15)

Bhaskar Dutta; Suresh Mutuswami, Indian Statistical Institute

Network structures are graphs where the nodes represent agents and an arc exists between twonodes if corresponding agents interact bilaterally. Jackson and Wolinsky demonstrate a potentialconflict between efficiency and stability of networks if self-interested agents can choose to formnew links or severe existing links. The main results of this paper uses an implementationapproach to examine this conflict between efficiency and stability of networks. Our resultssuggest that the tension between stability and efficiency can be reconciled.