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Strongly Stable Networks

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Author Info

  • Matthew O. Jackson

    (California Institute of Technology)

  • Anne van den Nouweland

    (University of Oregon)

Abstract

We analyze the formation of networks among individuals. In particular, we examine the existence of networks that are stable against changes in links by any coalition of individuals. We show that to investigate the existence of such strongly stable networks one can restrict focus on a component-wise egalitarian allocation of value. We show that when such strongly stable networks exist they coincide with the set of efficient networks (those maximizing the total productive value). We show that the existence of strongly stable networks is equivalent to core existence in a derived cooperative game and use that result to characterize the class of value functions for which there exist strongly stable networks via a ``top convexity'' condition on the value function on networks. We also consider a variation on strong stability where players can make side payments, and examine situations where value functions may be non- anonymous -- depending on player labels.

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Bibliographic Info

Paper provided by EconWPA in its series Microeconomics with number 0211006.

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Date of creation: 04 Nov 2002
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Handle: RePEc:wpa:wuwpmi:0211006

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Web page: http://128.118.178.162

Related research

Keywords: Networks; Network formation; strong stability; core; strong equilibrium; efficiency;

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References

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  1. Dutta, Bhaskar & Mutuswami, Suresh, 1997. "Stable Networks," Journal of Economic Theory, Elsevier, vol. 76(2), pages 322-344, October.
    • Dutta, Bhaskar & Mutuswami, Suresh, 1996. "Stable Networks," Working Papers 971, California Institute of Technology, Division of the Humanities and Social Sciences.
  2. Roger B. Myerson, 1976. "Graphs and Cooperation in Games," Discussion Papers 246, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  3. Jackson, Matthew O. & Watts, Alison, 2002. "The Evolution of Social and Economic Networks," Journal of Economic Theory, Elsevier, vol. 106(2), pages 265-295, October.
  4. Samir Kamat & Frank Page & Myrna Wooders, 2004. "Networks and Farsighted Stability," Econometric Society 2004 North American Winter Meetings 561, Econometric Society.
  5. Corominas-Bosch, Margarida, 2004. "Bargaining in a network of buyers and sellers," Journal of Economic Theory, Elsevier, vol. 115(1), pages 35-77, March.
  6. Mutuswami, Suresh & Winter, Eyal, 2002. "Subscription Mechanisms for Network Formation," Journal of Economic Theory, Elsevier, vol. 106(2), pages 242-264, October.
  7. Watts, Alison, 2001. "A Dynamic Model of Network Formation," Games and Economic Behavior, Elsevier, vol. 34(2), pages 331-341, February.
  8. Slikker, Marco & van den Nouweland, Anne, 2001. "A One-Stage Model of Link Formation and Payoff Division," Games and Economic Behavior, Elsevier, vol. 34(1), pages 153-175, January.
  9. Matthew O. Jackson & Bhaskar Dutta, 2000. "original papers : The stability and efficiency of directed communication networks," Review of Economic Design, Springer, vol. 5(3), pages 251-272.
  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.
  11. repec:fth:louvco:2000/20 is not listed on IDEAS
  12. Robert P. Gilles & Cathleen Johnson, 2000. "original papers : Spatial social networks," Review of Economic Design, Springer, vol. 5(3), pages 273-299.
  13. Chatterjee, Kalyan & Bhaskar Dutta & Debraj Ray & Kunal Sengupta, 1993. "A Noncooperative Theory of Coalitional Bargaining," Review of Economic Studies, Wiley Blackwell, vol. 60(2), pages 463-77, April.
  14. Sergio Currarini & Massimo Morelli, 2000. "original papers : Network formation with sequential demands," Review of Economic Design, Springer, vol. 5(3), pages 229-249.
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