Given the preferences of players and the rules governing network formation, what networks are likely to emerge and persist? And how do individuals and coalitions evaluate possible consequences of their actions in forming networks? To address these questions we introduce a model of network formation whose primitives consist of a feasible set of networks, player preferences, the rules of network formation, and a dominance relation on feasible networks. The rules of network formation may range from non-cooperative, where players may only act unilaterally, to cooperative, where coalitions of players may act in concert. The dominance relation over feasible networks incorporates not only player preferences and the rules of network formation but also assumptions concerning the degree of farsightedness of players. A specification of the primitives induces an abstract game consisting of (i) a feasible set of networks, and (ii) a path dominance relation defined on the feasible set of networks. Using this induced game we characterize sets of network outcomes that are likely to emerge and persist. Finally, we apply our approach and results to characterize the equilibrium of well known models and their rules of network formation, such as those of Jackson and Wolinsky (1996) and Jackson and van den Nouweland (2005).
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Paper provided by Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington in its series Caepr Working Papers with number
2007-020.
Find related papers by JEL classification: A14 - General Economics and Teaching - - General Economics - - - Sociology of Economics C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
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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.:
Herings, P. Jean-Jacques & Mauleon, Ana & Vannetelbosch, Vincent, 2006.
"Farsightedly Stable Networks,"
Research Memoranda
041, Maastricht : METEOR, Maastricht Research School of Economics of Technology and Organization.
[Downloadable!]
Other versions:
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!]
Jackson, Matthew O. & van den Nouweland, Anne, 2002.
"Strongly Stable Networks,"
Working Papers
1147, California Institute of Technology, Division of the Humanities and Social Sciences.
[Downloadable!]
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.)
Herings, P. Jean-Jacques & Mauleon, Ana & Vannetelbosch, Vincent, 2006.
"Farsightedly Stable Networks,"
Research Memoranda
041, Maastricht : METEOR, Maastricht Research School of Economics of Technology and Organization.
[Downloadable!]
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!]