HYPERGRAPH FORMATION GAME ＊ TACKSEUNG JUN Department of Economics, Kyung Hee University Seoul 130-701, Korea tj32k@khu.ac.kr AND JEONG-YOO KIM ＊＊ Department of Economics, Kyung Hee University Seoul 130-701, Korea jyookim@khu.ac.kr Received January 2008; Accepted February 2009 Abstract We define a hypergraph by a set of associations which consist of nonexclusive two or more players. It is a generalization of a graph (or a network) in the sense that an association, the counterpart of a link in a hypergraph, connects any number of nodes, not simply a pair of nodes. We characterize the efficient hypergraphs and stable hypergraphs for the linear variable cost of associations. The efficient hypergraph is either the empty hypergraph or the grand hypergraph consisting of a single grand association. The stable hypergraph can be a grand hypergraph, a star hypergraph or a line hypergraph. If a star hypergraph is stable, it must have a singleton center. Generally, a hypergraph can be underconnected, but cannot be over- connected. JEL Classification Code: C72 Key Words: Association, Efficiency, Hypergraph, Network, Stability I. Introduction Economic agents often share information only with some group of people by forming an informal or formal organization (or association) such as academic associations, social clubs, Hitotsubashi Journal of Economics 50 (2009), pp.107-122. Ⓒ Hitotsubashi University ＊ This project was begun when the second author was visiting University of Catholica at Milan in summer of 2005. We are grateful to the audience of the annual conference of the Korean Econometric Society held at Seoul National University in February of 2007 and the seminar participants at Hitotsubashi University, especially Taiji Furusawa, for helpful comments. ＊＊ Corresponding author.