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Contractually stable networks

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Author Info
CAULIER, Jean-Franois
MAULEON, Ana (UniversitŽ catholique de Louvain (UCL). Center for Operations Research and Econometrics (CORE))
VANNETELBOSCH, Vincent (UniversitŽ catholique de Louvain (UCL). Center for Operations Research and Econometrics (CORE))

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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 specifies 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 efficiency.

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Publisher Info
Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2008066.

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Date of creation: 01 Dec 2008
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Handle: RePEc:cor:louvco:2008066

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Related research
Keywords: networks; coalition structures; contractual stability; allocation rules.;

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Find related papers by JEL classification:
A14 - General Economics and Teaching - - General Economics - - - Sociology of Economics
C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General

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  1. Herings, P. Jean-Jacques & Mauleon, Ana & Vannetelbosch, Vincent J., 2004. "Rationalizability for social environments," Games and Economic Behavior, Elsevier, vol. 49(1), pages 135-156, October. [Downloadable!] (restricted)
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  2. Sang-Seung, Yi, 1996. "Endogenous formation of customs unions under imperfect competition: open regionalism is good," Journal of International Economics, Elsevier, vol. 41(1-2), pages 153-177, August. [Downloadable!] (restricted)
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  4. Bhaskar Dutta & Suresh Mutuswami, 1997. "Stable Networks," Tinbergen Institute Discussion Papers 97-039/1, Tinbergen Institute.
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  5. Furusawa, Taiji & Konishi, Hideo, 2007. "Free trade networks," Journal of International Economics, Elsevier, vol. 72(2), pages 310-335, July. [Downloadable!] (restricted)
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  6. Sanjeev Goyal & Sumit Joshi, 2006. "Bilateralism And Free Trade," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 47(3), pages 749-778, 08. [Downloadable!] (restricted)
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  7. Goyal, Sanjeev & Joshi, Sumit, 2003. "Networks of collaboration in oligopoly," Games and Economic Behavior, Elsevier, vol. 43(1), pages 57-85, April. [Downloadable!] (restricted)
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  8. Jackson, Matthew O. & van den Nouweland, Anne, 2005. "Strongly stable networks," Games and Economic Behavior, Elsevier, vol. 51(2), pages 420-444, May. [Downloadable!] (restricted)
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  9. Dr. Peter Kenning & Hilke Plassmann, 2004. "NeuroEconomics," Experimental 0412005, EconWPA. [Downloadable!]
  10. Jackson, Matthew O. & Wolinsky, Asher, 1996. "A Strategic Model of Social and Economic Networks," Journal of Economic Theory, Elsevier, vol. 71(1), pages 44-74, October. [Downloadable!] (restricted)
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  11. MAULEON, Ana & SEMPERE-MONERRIS, Jose & VANNETELBOSCH, Vincent J., 2005. "Networks of manufacturers and retailers," CORE Discussion Papers 2005041, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE). [Downloadable!]
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  12. Francis Bloch, 1995. "Endogenous Structures of Association in Oligopolies," RAND Journal of Economics, The RAND Corporation, vol. 26(3), pages 537-556, Autumn. [Downloadable!] (restricted)
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