Stable and Efficient Structures in Multigroup Network Formation

Abstract: In this work we present a strategic network formation model predicting the emergence of multigroup structures. Individuals decide to form or remove links based on the benefits and costs those connections carry; we focus on bilateral consent for link formation. An exogenous system specifies the frequency of coordination issues arising among the groups. We are interested in structures that arise to resolve coordination issues and, specifically, structures in which groups are linked through bridging, redundant, and co-membership interconnections. We characterize the conditions under which certain structures are stable and study their efficiency as well as the convergence of formation dynamics.