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Farsighted Stability in Hedonic Games

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  • Effrosyni Diamantoudi
  • Licun Xue

    ()
    (Department of Economics, University of Aarhus, Denmark)

Abstract

We investigate how rational individuals partition themselves into different coalitions in "hedonic games" [see Banerjee, Konishi and S”nmez (1998) and Bogomolnaia and Jackson (2000)], where individuals' preferences depend solely on the composition of the coalition they belong to. We show that the four solution concepts studied in the literature (core, Nash stability, individual stability and contractual individual stability) exhibit myopia on the part of the players. We amend these notions by endowing players with foresight in that they look many steps ahead and consider only credible outcomes. We show the existence and study the properties of the new solutions, as well as their relation to the previous notions.

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Bibliographic Info

Paper provided by School of Economics and Management, University of Aarhus in its series Economics Working Papers with number 2000-12.

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Length: 26
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Handle: RePEc:aah:aarhec:2000-12

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Web page: http://www.econ.au.dk/afn/

Related research

Keywords: Hedonic games; coalition structures; foresight;

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  1. Licun Xue, 1998. "Coalitional stability under perfect foresight," Economic Theory, Springer, vol. 11(3), pages 603-627.
  2. Demange, Gabrielle, 1994. "Intermediate preferences and stable coalition structures," Journal of Mathematical Economics, Elsevier, vol. 23(1), pages 45-58, January.
  3. Farrell, Joseph & Scotchmer, Suzanne, 1986. "Partnerships," Department of Economics, Working Paper Series qt49d211x4, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  4. Dreze, J H & Greenberg, J, 1980. "Hedonic Coalitions: Optimality and Stability," Econometrica, Econometric Society, vol. 48(4), pages 987-1003, May.
  5. Greenberg, Joseph, 1994. "Coalition structures," Handbook of Game Theory with Economic Applications, in: R.J. Aumann & S. Hart (ed.), Handbook of Game Theory with Economic Applications, edition 1, volume 2, chapter 37, pages 1305-1337 Elsevier.
  6. Suryapratim Banerjee & Hideo Konishi & Tayfun Sonmez, 1999. "Core in a Simple Coalition Formation Game," Boston College Working Papers in Economics 449, Boston College Department of Economics.
  7. Hart, Sergiu & Kurz, Mordecai, 1983. "Endogenous Formation of Coalitions," Econometrica, Econometric Society, vol. 51(4), pages 1047-64, July.
  8. Demange, Gabrielle, 1982. "Single-peaked orders on a tree," Mathematical Social Sciences, Elsevier, vol. 3(4), pages 389-396, December.
  9. Greenberg Joseph & Weber Shlomo, 1993. "Stable Coalition Structures with a Unidimensional Set of Alternatives," Journal of Economic Theory, Elsevier, vol. 60(1), pages 62-82, June.
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