Author： Mutuswami S. Winter E.
Publisher： Academic Press
ISSN： 0022-0531
Source： Journal of Economic Theory, Vol.106, Iss.2, 2002-10, pp. : 242-264
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Abstract
We analyze a model of network formation where the costs of link formation are publicly known but individual benefits are not known to the social planner. The objective is to design a simple mechanism ensuring efficiency, budget balance, and equity. We propose two mechanisms towards this end; the first ensures efficiency and budget balance but not equity. The second mechanism corrects the asymmetry in payoffs through a two-stage variant of the first mechanism.
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