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Farsightedly Stable Networks

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  • Herings, P. Jean-Jacques
  • Mauleon, Ana
  • Vannetelbosch, Vincent

    (METEOR)

Abstract

We propose a new concept, the pairwise farsightedly stable set, in order to predict which networks may be formed among farsighted players. A set of networks G is pairwise farsightedly stable (i) if all possible pairwise deviations from any network g ∈ G to a network outside G are deterred by the threat of ending worse off or equally well off, (ii) if there exists a farsightedly improving path from any network outside the set leading to some network in the set, and (iii) if there is no proper subset of G satisfying (i) and (ii). We show that a non-empty pairwise farsightedly stable set always exists and we provide a full characterization of unique pairwise farsightedly stable sets of networks. Contrary to other pairwise concepts, pairwise farsighted stability yields a Pareto dominating network, if it exists, as the unique outcome. Finally, we study the relationship between pairwise farsighted stability and other concepts such as the largest consistent set.

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Bibliographic Info

Paper provided by Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR) in its series Research Memorandum with number 041.

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Date of creation: 2006
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Handle: RePEc:unm:umamet:2006041

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Keywords: Economics ;

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References

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  1. Jackson, Matthew O. & van den Nouweland, Anne, 2002. "Strongly Stable Networks," Working Papers, California Institute of Technology, Division of the Humanities and Social Sciences 1147, California Institute of Technology, Division of the Humanities and Social Sciences.
  2. Dutta, Bhaskar & Ghosal, Sayantan & Ray, Debraj, 2005. "Farsighted network formation," Journal of Economic Theory, Elsevier, Elsevier, vol. 122(2), pages 143-164, June.
  3. Ana Mauleon & Vincent Vannetelbosch, 2004. "Farsightedness and Cautiousness in Coalition Formation Games with Positive Spillovers," Theory and Decision, Springer, Springer, vol. 56(3), pages 291-324, 05.
  4. Olivier Tercieux & Vincent Vannetelbosch, 2006. "A characterization of stochastically stable networks," International Journal of Game Theory, Springer, Springer, vol. 34(3), pages 351-369, October.
  5. Antoni Calvó-Armengol & Yves Zenou, 2003. "Social Networks and Crime Decisions: The Role of Social Structure in Facilitating Delinquent Behavior," Working Papers 52, Barcelona Graduate School of Economics.
  6. Samir Kamat & Frank Page & Myrna Wooders, 2004. "Networks and Farsighted Stability," Econometric Society 2004 North American Winter Meetings, Econometric Society 561, Econometric Society.
  7. Jackson, Matthew O. & Watts, Alison, 2002. "The Evolution of Social and Economic Networks," Journal of Economic Theory, Elsevier, Elsevier, vol. 106(2), pages 265-295, October.
  8. 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.
  9. Herings, P. Jean-Jacques & Mauleon, Ana & Vannetelbosch, Vincent J., 2004. "Rationalizability for social environments," Games and Economic Behavior, Elsevier, Elsevier, vol. 49(1), pages 135-156, October.
  10. Licun Xue, 1998. "Coalitional stability under perfect foresight," Economic Theory, Springer, Springer, vol. 11(3), pages 603-627.
  11. Dutta, Bhaskar & Mutuswami, Suresh, 1996. "Stable Networks," Working Papers, California Institute of Technology, Division of the Humanities and Social Sciences 971, California Institute of Technology, Division of the Humanities and Social Sciences.
  12. Watts, Alison, 2001. "A Dynamic Model of Network Formation," Games and Economic Behavior, Elsevier, Elsevier, vol. 34(2), pages 331-341, February.
  13. Sengupta, Abhijit & Sengupta, Kunal, 1994. "Viable Proposals," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 35(2), pages 347-59, May.
  14. Frank Page & Myrna Wooders, 2007. "Strategic Basins of Attraction, the Path Dominance Core, and Network Formation Games," Caepr Working Papers, Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington 2007-020, Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington.
  15. Watts, Alison, 2002. "Non-myopic formation of circle networks," Economics Letters, Elsevier, Elsevier, vol. 74(2), pages 277-282, January.
  16. Chwe Michael Suk-Young, 1994. "Farsighted Coalitional Stability," Journal of Economic Theory, Elsevier, Elsevier, vol. 63(2), pages 299-325, August.
  17. A Bhattacharya, . "Stable and Efficient Networks with Farsighted Players: the Largest Consistent Set," Discussion Papers, Department of Economics, University of York 09/34, Department of Economics, University of York.
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