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Pairwise-stability and Nash equilibria in network formation

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Author Info

  • Antoni Calvó-Armengol
  • Rahmi İlkılıç

    ()

Abstract

Suppose that individual payoffs depend on the network connecting them. Consider the following simultaneous move game of network formation: players announce independently the links they wish to form, and links are formed only under mutual consent. We provide necessary and sufficient conditions on the network link marginal payoffs such that the set of pairwise stable, pairwise-Nash and proper equilibrium networks coincide, where pairwise stable networks are robust to one-link deviations, while pairwise-Nash networks are robust to one-link creation but multi-link severance. Under these conditions, proper equilibria in pure strategies are fully characterized by one-link deviation checks.

(This abstract was borrowed from another version of this item.)

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File URL: http://hdl.handle.net/10.1007/s00182-008-0140-7
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Bibliographic Info

Article provided by Springer in its journal International Journal of Game Theory.

Volume (Year): 38 (2009)
Issue (Month): 1 (March)
Pages: 51-79

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Handle: RePEc:spr:jogath:v:38:y:2009:i:1:p:51-79

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Related research

Keywords: Network formation; Pairwise-stability; Proper equilibrium; C62; C72; D85; L14;

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  1. Francis Bloch & Matthew Jackson, 2006. "Definitions of equilibrium in network formation games," International Journal of Game Theory, Springer, vol. 34(3), pages 305-318, October.
  2. Dutta, B. & Nouweland, C.G.A.M. van den & Tijs, S.H., 2003. "Link formation in cooperative situations," Open Access publications from Tilburg University urn:nbn:nl:ui:12-121826, Tilburg University.
  3. Jackson, Matthew O. & van den Nouweland, Anne, 2005. "Strongly stable networks," Games and Economic Behavior, Elsevier, vol. 51(2), pages 420-444, May.
  4. Jackson, Matthew O., 1998. "The Evolution of Social and Economic Networks," Working Papers 1044, California Institute of Technology, Division of the Humanities and Social Sciences.
  5. Bloch, Francis & Jackson, Matthew, 2004. "The Formation of Networks with Transfers among Players," Working Papers 1194, California Institute of Technology, Division of the Humanities and Social Sciences.
  6. Matthew O. Jackson & Asher Wolinsky, 1995. "A Strategic Model of Social and Economic Networks," Discussion Papers 1098R, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  7. Dutta, Bhaskar & Mutuswami, Suresh, 1996. "Stable Networks," Working Papers 971, California Institute of Technology, Division of the Humanities and Social Sciences.
  8. George J. Mailath & Larry Samuelson & Jeroen M. Swinkels, . "How Proper is Sequential Equilibrium," ELSE working papers 045, ESRC Centre on Economics Learning and Social Evolution.
  9. Sudipta Sarangi & Robert P. Gilles, . "Stable Networks and Convex Payoffs," Departmental Working Papers 2005-13, Department of Economics, Louisiana State University.
  10. Matthew O. Jackson & Brian W. Rogers, 2005. "Search in the Formation of Large Networks: How Random are Socially Generated Networks?," Game Theory and Information 0503005, EconWPA.
  11. Venkatesh Bala & Sanjeev Goyal, 2000. "A Noncooperative Model of Network Formation," Econometrica, Econometric Society, vol. 68(5), pages 1181-1230, September.
  12. Sanjeev Goyal & Sumit Joshi, 2006. "Unequal connections," International Journal of Game Theory, Springer, vol. 34(3), pages 319-349, October.
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