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On the Stability of Hierarchies in Games with Externalities

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  • Sergio Currarini

    (University of Venezia, Italy)

Abstract

We study the group stability of collective decision making when society is organized according to a non directed graph, and groups’ payoff possibilities are given by a partition function. We focus on the stability properties of hierarchical organizations, formally described by minimally connected graphs (or trees). Building on previous works by Greenberg and Weber (1986, 1993) and by Demange (1994, 2001), we restrict the ability of raising objections to proposed payoff imputations to coalitions that are connected in the organization. We show that the stability properties of hierachical organizations, proved in Demange (1994, 2002), extend to partition function games with negative externalities. Under positive externalities, although not ensuring social stability, hierarchies are the “most stable” organizational forms for society.

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Bibliographic Info

Paper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number 2003.19.

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Date of creation: Mar 2003
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Handle: RePEc:fem:femwpa:2003.19

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Keywords: Hierarchies; Externalities;

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  1. Mamoru Kaneko & Myrna Holtz Wooders, 1982. "Cores of Partitioning Games," Cowles Foundation Discussion Papers 620, Cowles Foundation for Research in Economics, Yale University.
  2. Gabrielle Demange, 2004. "On group stability in hierarchies and networks," Post-Print halshs-00581662, HAL.
  3. Greenberg, J. & Weber, S., 1991. "Stable Coalition Structure with Unidimensional Set of Alternatives," Papers 91-11, York (Canada) - Department of Economics.
  4. Matthew O. Jackson & Asher Wolinsky, 1994. "A Strategic Model of Social and Economic Networks," Discussion Papers 1098, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  5. Roger B. Myerson, 1976. "Graphs and Cooperation in Games," Discussion Papers 246, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  6. Demange, G., 1991. "Intermediate Preferences and Stable Coalition Structures," DELTA Working Papers 91-16, DELTA (Ecole normale supérieure).
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Cited by:
  1. Hafalir, Isa E., 2007. "Efficiency in coalition games with externalities," Games and Economic Behavior, Elsevier, vol. 61(2), pages 242-258, November.

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