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Networks And Farsighted Stability

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Author Info
Page Jr, Frank H (Department of Finance, University of Alabama)
Wooders, Myrna H. (Department of Economics, University of Warwick)
Kamat, Samir (Portfolio Management Group, Wachovia Corporation)

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Abstract

The main contribution of this paper is to provide a framework in which the notion of farsighted stability for games, introduced by Chwe (1994), can be applied to directed networks. In particular, we introduce the notion of a supernetwork. A supernetwork is made up of a collection of directed networks (the nodes) and uniquely represents (via the arcs connecting the nodes) agent preferences and the rules governing network formation. By reformulating Chwe’s basic result on the nonemptiness of farsightedly stable sets, we show that for any supernetwork (i.e., for any collection of directed networks and any collection of rules governing network formation), there exists a farsightedly stable directed network. We also introduce the notion of a Nash network relative to a given supernetwork, as well as the notions of symmetric, nonsimultaneous, and decomposable supernetworks. To illustrate the utility of our framework, we present several examples of supernetworks, compute the farsightedly stable networks, and the Nash networks.

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File URL: http://www2.warwick.ac.uk/fac/soc/economics/research/workingpapers/publications/2002/twerp660.pdf
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Paper provided by University of Warwick, Department of Economics in its series The Warwick Economics Research Paper Series (TWERPS) with number 660.

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Length: 34 pages
Date of creation: 2002
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Handle: RePEc:wrk:warwec:660

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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.:
  1. Matthew O. Jackson, 2002. "The Stability and Efficiency of Economic and Social Networks," Microeconomics 0211011, EconWPA. [Downloadable!]
  2. Page Jr, Frank H & Wooders, Myrna H & Kamat, Samir, 2001. "Networks And Farsighted Stability," The Warwick Economics Research Paper Series (TWERPS) 621, University of Warwick, Department of Economics. [Downloadable!]
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  3. Shapley, Lloyd S & Shubik, Martin, 1969. "On the Core of an Economic System with Externalities," American Economic Review, American Economic Association, vol. 59(4), pages 678-84, Part I Se. [Downloadable!] (restricted)
  4. BHATTACHARYA, Anindya & ZIAD, Abderrahmane, 2003. "On conservative stable standard of behaviour in situations with perfect foresight," CORE Discussion Papers 2003049, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE). [Downloadable!]
  5. Li, Shuhe, 1992. "Far-sighted strong equilibrium and oligopoly," Economics Letters, Elsevier, vol. 40(1), pages 39-44, September. [Downloadable!] (restricted)
  6. Bhaskar Dutta & Sayantan Ghosal & Debraj Ray, 2004. "Farsighted Network Formation," Working papers 122, Centre for Development Economics, Delhi School of Economics. [Downloadable!]
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  7. Konishi, Hideo & Ray, Debraj, 2003. "Coalition formation as a dynamic process," Journal of Economic Theory, Elsevier, vol. 110(1), pages 1-41, May. [Downloadable!] (restricted)
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  8. Dutta, Bhaskar & Mutuswami, Suresh, 1997. "Stable Networks," Journal of Economic Theory, Elsevier, vol. 76(2), pages 322-344, October. [Downloadable!] (restricted)
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  9. Watts, Alison, 2001. "A Dynamic Model of Network Formation," Games and Economic Behavior, Elsevier, vol. 34(2), pages 331-341, February. [Downloadable!] (restricted)
  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. [Downloadable!] (restricted)
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  11. Ana, MAULEON & Vincent, VANNETELBOSCH, 2003. "Farsightedness and Cautiousness in Coalition Formation," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2003003, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES). [Downloadable!]
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  12. Jackson, Matthew O., 1998. "The Evolution of Social and Economic Networks," Working Papers 1044, California Institute of Technology, Division of the Humanities and Social Sciences. [Downloadable!]
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  13. Venkatesh Bala & Sanjeev Goyal, 2000. "A Noncooperative Model of Network Formation," Econometrica, Econometric Society, vol. 68(5), pages 1181-1230, September.
  14. Chwe Michael Suk-Young, 1994. "Farsighted Coalitional Stability," Journal of Economic Theory, Elsevier, vol. 63(2), pages 299-325, August. [Downloadable!] (restricted)
  15. Deroian, Frederic, 2003. "Farsighted strategies in the formation of a communication network," Economics Letters, Elsevier, vol. 80(3), pages 343-349, September. [Downloadable!] (restricted)
  16. Licun Xue, 1998. "Coalitional stability under perfect foresight," Economic Theory, Springer, vol. 11(3), pages 603-627. [Downloadable!] (restricted)
  17. Watts, Alison, 2002. "Non-myopic formation of circle networks," Economics Letters, Elsevier, vol. 74(2), pages 277-282, January. [Downloadable!] (restricted)
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