The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Network Formation

  • Matthew O. Jackson
Reference work entry


A brief introduction and overview of models of the formation of networks is given, with a focus on two types of model. The first views networks as arising stochastically, and uses random graph theory, while the second views the links in a network as social or economic relationships chosen by the involved parties, and uses game theoretic reasoning.


Clustering Degree distributions Graph theory Myerson value Network formation Pairwise stability Random graphs Small worlds 

JEL Classifications

This is a preview of subscription content, log in to check access.


  1. Aumann, R., and R. Myerson. 1988. Endogenous formation of links between players and coalitions: an application of the Shapley value. In The shapley value, ed. A. Roth. Cambridge: Cambridge University Press.Google Scholar
  2. Bala, V., and S. Goyal. 2000. A non-cooperative model of network formation. Econometrica 68: 1181–1230.CrossRefGoogle Scholar
  3. Barabási, A., and R. Albert. 1999. Emergence of scaling in random networks. Science 286: 509–512.CrossRefGoogle Scholar
  4. Bloch, F. 2004. Group and network formation in industrial organization: a survey. In Group formation in economics; networks, clubs and coalitions, ed. G. Demange and M. Wooders. Cambridge: Cambridge University Press.Google Scholar
  5. Bollobás, B. 2001. Random graphs. 2nd ed. Cambridge: Cambridge University Press.CrossRefGoogle Scholar
  6. Boorman, S. 1975. A combinatorial optimization model for transmission of job information through contact networks. Bell Journal of Economics 6: 216–249.CrossRefGoogle Scholar
  7. Currarini, S., and M. Morelli. 2000. Network formation with sequential demands. Review of Economic Design 5: 229–250.CrossRefGoogle Scholar
  8. Dutta, B., and S. Mutuswami. 1997. Stable networks. Journal of Economic Theory 76: 322–344.CrossRefGoogle Scholar
  9. Erdös, P., and A. Rényi. 1960. On the evolution of random graphs. Publication of the Mathematical Institute of the Hungarian Academy of Sciences 5: 17–61.Google Scholar
  10. Falk, A., and M. Kosfeld. 2003. It’s all about connections: Evidence on network formation. Mimeo: University of Zurich.Google Scholar
  11. Frank, O., and D. Strauss. 1986. Markov graphs. Journal of the American Statistical Association 81: 832–842.CrossRefGoogle Scholar
  12. Granovetter, M. 1973. The strength of weak ties. American Journal of Sociology 78: 1360–1380.CrossRefGoogle Scholar
  13. Ioannides, Y.M., and L.D. Loury. 2004. Job information networks, neighborhood effects and inequality. Journal of Economic Literature 42: 1056–1093.CrossRefGoogle Scholar
  14. Jackson, M.O. 2004. A survey of models of network formation: stability and efficiency. In Group formation in economics: Networks, clubs and coalitions, ed. G. Demange and M. Wooders. Cambridge: Cambridge University Press.Google Scholar
  15. Jackson, M.O. 2006. The economics of social networks. In Chapter 1, volume 1 in Advances in economics and econometrics, theory and applications: ninth world congress of the econometric society, ed. R. Blundell, W. Newey, and T. Persson. Cambridge: Cambridge University Press.Google Scholar
  16. Jackson, M.O., and B.W. Rogers. 2007. Meeting strangers and friends of friends: how random are socially generated networks? American Economic Review 97: 890–915.CrossRefGoogle Scholar
  17. Jackson, M.O., and A. Wolinsky. 1996. A strategic model of social and economic networks. Journal of Economic Theory 71: 44–74.CrossRefGoogle Scholar
  18. Kranton, R., and D. Minehart. 2001. A theory of buyer–seller networks. American Economic Review 91: 485–508.CrossRefGoogle Scholar
  19. Molloy, M., and B. Reed. 1995. A critical point for random graphs with a given degree sequence. Random Structures & Algorithms 6: 161–179.CrossRefGoogle Scholar
  20. Montgomery, J. 1991. Social networks and labor market outcomes. American Economic Review 81: 1408–1418.Google Scholar
  21. Myerson, R. 1977. Graphs and cooperation in games. Math Operations Research 2: 225–229.CrossRefGoogle Scholar
  22. Newman, M. 2003. The structure and function of complex networks. SIAM Review 45: 167–256.CrossRefGoogle Scholar
  23. Page, F., M. Wooders, and S. Kamat. 2005. Networks and farsighted stability. Journal of Economic Theory 120: 257–269.CrossRefGoogle Scholar
  24. Price, D.J.S. 1965. Networks of scientific papers. Science 149: 510–515.CrossRefGoogle Scholar
  25. Price, D.J.S. 1976. A general theory of bibliometric and other cumulative advantage processes. Journal of the American Society for Information Science 27: 292–306.CrossRefGoogle Scholar
  26. Simon, H. 1955. On a class of skew distribution functions. Biometrika 42: 425–440.CrossRefGoogle Scholar
  27. Watts, A. 2001. A dynamic model of network formation. Games and Economic Behavior 34: 331–341.CrossRefGoogle Scholar
  28. Watts, D.J. 1999. Small Worlds: The dynamics of networks between order and randomness. Princeton: Princeton University Press.Google Scholar
  29. Watts, D.J., and S. Strogatz. 1998. Collective dynamics of ‘small-world’ networks. Nature 393: 440–442.CrossRefGoogle Scholar

Copyright information

© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Matthew O. Jackson
    • 1
  1. 1.