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Pairwise-stability and Nash equilibria in network formation

  • Antoni Calvó-Armengol
  • Rahmi İlkılıç

    ()

Suppose that individual payoffs depend on the network connecting them. Consider the following simultaneous move game of network formation: players announce independently the links they wish to form, and links are formed only under mutual consent. We provide necessary and sufficient conditions on the network link marginal payoffs such that the set of pairwise stable, pairwise-Nash and proper equilibrium networks coincide, where pairwise stable networks are robust to one-link deviations, while pairwise-Nash networks are robust to one-link creation but multi-link severance. Under these conditions, proper equilibria in pure strategies are fully characterized by one-link deviation checks.

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File URL: http://hdl.handle.net/10.1007/s00182-008-0140-7
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Article provided by Springer in its journal International Journal of Game Theory.

Volume (Year): 38 (2009)
Issue (Month): 1 (March)
Pages: 51-79

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Handle: RePEc:spr:jogath:v:38:y:2009:i:1:p:51-79
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  1. 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.
  2. Francis Bloch & Matthew Jackson, 2006. "Definitions of equilibrium in network formation games," International Journal of Game Theory, Springer, vol. 34(3), pages 305-318, October.
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