A dynamic model of network formation

Network structure plays a significant role in determining the outcome of ma ny important economic relationships; therefore it is crucial to know which network configurations will arise. We analyze the process of network format ion in a dynamic framework, where self-interested individuals can form and sever links. We determine which network structures the formation process wi ll converge to. This information allows us to determine whether or not the formation process will converge to an efficient network structure. Classifi cation Numbers: A14, C7, D20. (C) 2001 Academic Press.