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Strongly stable networks

  • Jackson, Matthew O.
  • van den Nouweland, Anne

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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Article provided by Elsevier in its journal Games and Economic Behavior.

Volume (Year): 51 (2005)
Issue (Month): 2 (May)
Pages: 420-444

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Handle: RePEc:eee:gamebe:v:51:y:2005:i:2:p:420-444
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622836

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  1. Roger B. Myerson, 1976. "Graphs and Cooperation in Games," Discussion Papers 246, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  2. 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.
  3. 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.
  4. Matthew O. Jackson & Asher Wolinsky, 1994. "A Strategic Model of Social and Economic Networks," Discussion Papers 1098, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  5. Watts, Alison, 2001. "A Dynamic Model of Network Formation," Games and Economic Behavior, Elsevier, vol. 34(2), pages 331-341, February.
  6. 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.
  7. Corominas-Bosch, Margarida, 2004. "Bargaining in a network of buyers and sellers," Journal of Economic Theory, Elsevier, vol. 115(1), pages 35-77, March.
  8. Suresh Mutuswami & Eyal Winter, 2001. "Subscription Mechanisms for Network Formation," Discussion Paper Series dp264, The Federmann Center for the Study of Rationality, the Hebrew University, Jerusalem.
  9. Page, Frank Jr. & Wooders, Myrna H. & Kamat, Samir, 2005. "Networks and farsighted stability," Journal of Economic Theory, Elsevier, vol. 120(2), pages 257-269, February.
  10. Robert P. Gilles & Cathleen Johnson, 2000. "original papers : Spatial social networks," Review of Economic Design, Springer, vol. 5(3), pages 273-299.
  11. Sergio Currarini & Massimo Morelli, 2000. "original papers : Network formation with sequential demands," Review of Economic Design, Springer, vol. 5(3), pages 229-249.
  12. 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.
  13. 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.
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