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Farsighted Network Formation

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Author Info
Bhaskar Dutta (University of Warwick)
Sayantan Ghosal (University of Warwick)
Debraj Ray (University of New York)

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Abstract

This paper studies a model of dynamic network formation when individuals are farsighted : players evaluate the desirability of a “current” move in terms of its consequences on the entire discounted stream of payoffs. We define a concept of equilibrium which takes into account far-sighted behavior of agents and allows for limited cooperation amongst agents. We show that an equilibrium process of network formation exists. We also show that there are network structures in which no equilibrium strategy profile can sustain efficient networks. We then provide sufficient conditions under which the equilibrium process will yield efficient outcomes.

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Publisher Info
Paper provided by Centre for Development Economics, Delhi School of Economics in its series Working papers with number 122.

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Length: 49 pages
Date of creation: Mar 2004
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Handle: RePEc:cde:cdewps:122

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Related research
Keywords: Network formation; farsightedness; equilibrium; efficiency.;

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Find related papers by JEL classification:
C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
D7 - Microeconomics - - Analysis of Collective Decision-Making

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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  5. 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. [Downloadable!]
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  6. Matthew O. Jackson, 2002. "The Stability and Efficiency of Economic and Social Networks," Microeconomics 0211011, EconWPA. [Downloadable!]
  7. Garance Genicot & Debraj Ray, 2003. "Group Formation in Risk--Sharing Arrangements," Review of Economic Studies, Blackwell Publishing, vol. 70(1), pages 87-113, January.
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  15. Adsera, Alicia & Ray, Debraj, 1998. " History and Coordination Failure," Journal of Economic Growth, Springer, vol. 3(3), pages 267-76, September. [Downloadable!] (restricted)
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  21. Page, Frank Jr. & Wooders, Myrna H. & Kamat, Samir, 2005. "Networks and farsighted stability," Journal of Economic Theory, Elsevier, vol. 120(2), pages 257-269, February. [Downloadable!] (restricted)
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Nicolas Querou & Sylvain Beal, 2006. "Bounded Rationality and Repeated Network Formation," Working Papers 2006.74, Fondazione Eni Enrico Mattei. [Downloadable!]
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  2. François Fontaine, 2005. "Why Are Similar Workers Paid Differently? The Role of Social Networks," IZA Discussion Papers 1786, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  3. Herings, P. Jean-Jacques & Peeters, Ronald, 2006. "Homotopy Methods to Compute Equilibria in Game Theory," Research Memoranda 046, Maastricht : METEOR, Maastricht Research School of Economics of Technology and Organization. [Downloadable!]
  4. Page Jr. Frank H & Wooders, Myrna & Kamat, Samir, 2003. "Networks and Farsighted Stability," The Warwick Economics Research Paper Series (TWERPS) 689, University of Warwick, Department of Economics. [Downloadable!]
    Other versions:
  5. Roland Pongou & Roberto Serrano, 2009. "A dynamic theory of fidelity networks with an application to the spread of HIV/AIDS," Working Papers 2009-03, Instituto Madrileño de Estudios Avanzados (IMDEA) Ciencias Sociales. [Downloadable!]
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  6. Charness, Gary & Jackson, Matthew O., 2004. "Group Play in Games and the Role of Consent in Network Formation," Working Papers 1193, California Institute of Technology, Division of the Humanities and Social Sciences. [Downloadable!]
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  7. Masaki Iimura & Seiji Murakoshi & Toru Hokari, 2007. "Subgame-perfect market sharing agreements," Economics Bulletin, Economics Bulletin, vol. 3(7), pages 1-14. [Downloadable!]
  8. Chantarat, Sommarat & Barrett, Christopher B., 2007. "Social Network Capital, Economic Mobility and Poverty Traps," MPRA Paper 1947, University Library of Munich, Germany. [Downloadable!]
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  9. Ana Babus, 2007. "The Formation of Financial Networks," Working Papers 2007.69, Fondazione Eni Enrico Mattei. [Downloadable!]
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  10. Page, Jr. Frank H. & Wooders, Myrna H & Kamat, Samir, 2004. "Farsightedly Basic Networks," The Warwick Economics Research Paper Series (TWERPS) 702, University of Warwick, Department of Economics. [Downloadable!]
  11. HERINGS, Jean-Jacques & MAULEON, Ana & VANNETELBOSCH, Vincent, 2006. "Farsightedly stable networks," CORE Discussion Papers 2006092, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE). [Downloadable!]
    Other versions:
  12. Frank H. Page & Myrna H. Wooders, 2009. "Endogenous Network Dynamics," Working Papers 2009.28, Fondazione Eni Enrico Mattei. [Downloadable!]
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  13. Sanjeev Goyal, 2003. "Learning in Networks: a survey," Economics Discussion Papers 563, University of Essex, Department of Economics. [Downloadable!]
  14. Vincent Vannetelbosch & Gilles Grandjean & Ana Mauleon, 2009. "Connections Among Farsighted Agents," Working Papers 2009.30, Fondazione Eni Enrico Mattei. [Downloadable!]
  15. Matthew O. Jackson, 2003. "A Survey of Models of Network Formation: Stability and Efficiency," Game Theory and Information 0303011, EconWPA. [Downloadable!]
    Other versions:
  16. Francis Bloch & Matt Jackson, 2004. "The Formation of Networks with Side Payments," Econometric Society 2004 North American Summer Meetings 198, Econometric Society. [Downloadable!]
  17. Frédéric Deroïan, 2006. "Formation of a Communication Network Under Perfect Foresight," Theory and Decision, Springer, vol. 61(3), pages 191-204, November. [Downloadable!] (restricted)
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This page was last updated on 2009-10-18.

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