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Contractually stable networks

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Author Info

  • Jean-François Caulier

    () (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne)

  • A. Mauleon

    (CORE - Center of Operation Research and Econometrics [Louvain] - Université Catholique de Louvain (UCL) - Belgique)

  • Vincent Vannetelbosch

    () (CORE - Center of Operation Research and Econometrics [Louvain] - Université Catholique de Louvain (UCL) - Belgique)

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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Bibliographic Info

Paper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number hal-00633611.

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Date of creation: 2013
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Publication status: Published, International Journal of Game Theory, 2013, Published online 26 October 2012 (17 p.)
Handle: RePEc:hal:cesptp:hal-00633611

Note: View the original document on HAL open archive server: http://hal.archives-ouvertes.fr/hal-00633611
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Related research

Keywords: Networks ; Coalition Structures ; Contractual Stability ; Allocation Rules Networks ; Strong efficiency;

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  1. Herings, P. Jean-Jacques & Mauleon, Ana & Vannetelbosch, Vincent J., 2004. "Rationalizability for social environments," Open Access publications from Maastricht University urn:nbn:nl:ui:27-12153, Maastricht University.
  2. Ping Wang & Alison Watts, 2006. "Formation of buyer-seller trade networks in a quality-differentiated product market," Canadian Journal of Economics, Canadian Economics Association, vol. 39(3), pages 971-1004, August.
  3. Dutta, Bhaskar & Mutuswami, Suresh, 1996. "Stable Networks," Working Papers 971, California Institute of Technology, Division of the Humanities and Social Sciences.
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  5. 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.
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  9. Ana, MAULEON & José, SEMPERE-MONERRIS & Vincent, VANNETELBOSCH, 2005. "Networks of Manufacturers and Retailers," Discussion Papers (ECON - Département des Sciences Economiques) 2005036, Université catholique de Louvain, Département des Sciences Economiques.
  10. 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.
  11. Rachel E. Kranton & Deborah F. Minehart, 2001. "A Theory of Buyer-Seller Networks," American Economic Review, American Economic Association, vol. 91(3), pages 485-508, June.
  12. Francis Bloch, 1995. "Endogenous Structures of Association in Oligopolies," RAND Journal of Economics, The RAND Corporation, vol. 26(3), pages 537-556, Autumn.
  13. Rachel E. Kranton & Deborah F. Minehart, 2000. "Networks versus Vertical Integration," RAND Journal of Economics, The RAND Corporation, vol. 31(3), pages 570-601, Autumn.
  14. Bhaskar Dutta & Suresh Mutuswami, 1997. "Stable Networks," Tinbergen Institute Discussion Papers 97-039/1, Tinbergen Institute.
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