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Contractually Stable Networks

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  • Jean-Francois Caulier
  • Ana Mauleon
  • Vincent VAnnetelbosch

Abstract

We develop a theoretical framework that allows us to study which bilateral links and coalition structures are going to emerge at equilibrium. We define the notion of coalitional network to represent a network and a coalition structure, where the network speciÖes the nature of the relationship each individual has with his coalition members and with individuals outside his coalition. To predict the coalitional networks that are going to emerge at equilibrium we propose the concept of contractual stability which requires that any change made to the coalitional network needs the consent of both the deviating players and their original coalition partners. We show that there always exists a contractually stable coalitional network under the simple majority decision rule and the component-wise egalitarian or majoritarian allocation rules. Moreover, requiring the consent of group members may help to reconcile stability and e¢ ciency.

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Paper provided by www.najecon.org in its series NajEcon Working Paper Reviews with number 843644000000000084.

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Date of creation: 02 Jun 2007
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Handle: RePEc:cla:najeco:843644000000000084

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  1. Matthew O. Jackson & Asher Wolinsky, 1995. "A Strategic Model of Social and Economic Networks," Discussion Papers, Northwestern University, Center for Mathematical Studies in Economics and Management Science 1098R, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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  6. Francis Bloch, 1995. "Endogenous Structures of Association in Oligopolies," RAND Journal of Economics, The RAND Corporation, vol. 26(3), pages 537-556, Autumn.
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  14. Sanjeev Goyal & Sumit Joshi, 2000. "Networks of Collaboration in Oligopoly," Tinbergen Institute Discussion Papers 00-092/1, Tinbergen Institute.
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Cited by:
  1. Jean-François Caulier & Michel Grabisch & Agnieszka Rusinowska, 2013. "An allocation rule for dynamic random network formation processes," Documents de travail du Centre d'Economie de la Sorbonne, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne 13063, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
  2. repec:pdn:wpaper:73 is not listed on IDEAS
  3. Nils Roehl, 2013. "Two-Stage Allocation Rules," Working Papers CIE 73, University of Paderborn, CIE Center for International Economics.

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