We present a variant of a general equilibrium model with group formation to study how changes of non-consumptive benefits from group formation impact on the well-being of group members. We identify a human relations paradox: Positive externalities increase, but none of the group members gains in...

In a model of strategic network formation, the endogenously formed network is built around a pre-existing network. We envisage that the pre-existing or core network is publicly provided. Strategic network formation is decentralized: Players act in their private interest and bear the costs when...