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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 (Department of Economics, University of Warwick)
Kamat, Samir (Portfolio Management Group, Wachovia Corporation)

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Abstract

We make two main contributions to the theory of economic and social network formation. First, we introduce the notion of a network formation network or a supernetwork. Supernetworks provide a framework in which we can formally define and analyze farsightedness in network formation. Second, we introduce a new notion of equilibrium corresponding to farsightedness. In particular, we introduce the notion of a farsightedly basic network, as well as the notion of a farsighted basis, and we show that all supernetworks possess a farsighted basis. A farsightedly basic network contained in the farsighted basis of a given supernetwork represents a possible final resting point (or absorbing state) of a network formation process in which agents behave farsightedly. Given the supernetwork representation of the rules governing network formation and the preferences of the individuals, a farsighted basis contains networks which are likely to emerge and persist if individuals behave farsightedly

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File URL: http://www2.warwick.ac.uk/fac/soc/economics/research/workingpapers/publications/twerp689.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 689.

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Length: 26 pages
Date of creation: 2003
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Handle: RePEc:wrk:warwec:689

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Related research
Keywords: network formation ; supernetworks ; farsighted stability;

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Find related papers by JEL classification:
A14 - General Economics and Teaching - - General Economics - - - Sociology of Economics
D20 - Microeconomics - - Production and Organizations - - - General
J00 - Labor and Demographic Economics - - General - - - General

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  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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