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Connections Among Farsighted Agents


We study the stability of social and economic networks when players are farsighted. In particular, we examine whether the networks formed by farsighted players are different from those formed by myopic players. We adopt Herings, Mauleon and Vannetelbosch’s (Games and Economic Behavior, forthcoming) notion of pairwise farsightedly stable set. We first investigate in some classical models of social and economic networks whether the pairwise farsightedly stable sets of networks coincide with the set of pairwise (myopically) stable networks and the set of strongly efficient networks. We then provide some primitive conditions on value functions and allocation rules so that the set of strongly efficient networks is the unique pairwise farsightedly stable set. Under the componentwise egalitarian allocation rule, the set of strongly efficient networks and the set of pairwise (myopically) stable networks that are immune to coalitional deviations are the unique pairwise farsightedly stable set if and only if the value function is top convex.

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Article provided by Association for Public Economic Theory in its journal Journal of Public Economic Theory.

Volume (Year): 13 (2011)
Issue (Month): 6 (December)
Pages: 935-955

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Handle: RePEc:bla:jpbect:v:13:y:2011:i:6:p:935-955
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  1. 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).
  2. Herings, P. Jean-Jacques & Mauleon, Ana & Vannetelbosch, Vincent J., 2004. "Rationalizability for social environments," Games and Economic Behavior, Elsevier, vol. 49(1), pages 135-156, October.
  3. 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.
  4. 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.
  5. Matthew O. Jackson & Anne van den Nouweland, 2002. "Strongly Stable Networks," Microeconomics 0211006, EconWPA.
  6. Corominas-Bosch, Margarida, 2004. "Bargaining in a network of buyers and sellers," Journal of Economic Theory, Elsevier, vol. 115(1), pages 35-77, March.
  7. Rachel E. Kranton & Deborah F. Minehart, 2001. "A Theory of Buyer-Seller Networks," American Economic Review, American Economic Association, vol. 91(3), pages 485-508, June.
  8. Watts, Alison, 2001. "A Dynamic Model of Network Formation," Games and Economic Behavior, Elsevier, vol. 34(2), pages 331-341, February.
  9. Ana Mauleon & Vincent Vannetelbosch, 2004. "Farsightedness and Cautiousness in Coalition Formation Games with Positive Spillovers," Theory and Decision, Springer, vol. 56(3), pages 291-324, 05.
  10. Licun Xue, 1998. "Coalitional stability under perfect foresight," Economic Theory, Springer, vol. 11(3), pages 603-627.
  11. Bhaskar Dutta & Sayantan Ghosal & Debraj Ray, 2004. "Farsighted Network Formation," Working papers 122, Centre for Development Economics, Delhi School of Economics.
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