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Farsighted stability in hedonic games

  • Effrosyni Diamantoudi

    ()

  • Licun Xue

We investigate how rational individuals partition themselves into different coalitions in “hedonic games” (see Banerjee et al. 2001 and Bogomolnaia and Jackson 2002), where individuals' preferences depend solely on the composition of the coalition they belong to. Given that the four solution concepts studied in the literature (core, Nash stability, individual stability and contractual individual stability) may exhibit myopia on the part of the players, we amend these notions by endowing players with foresight in that they look many steps ahead and consider only credible outcomes. We study the properties of the farsighted stability solutions; in particular, we show that when preferences are strict, coalition structures in the core are farsighted stable and a similar result also holds for Nash stability but not for individual stability and contractual individual stability. Copyright Springer-Verlag 2003

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File URL: http://hdl.handle.net/10.1007/s00355-003-0200-7
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Article provided by Springer in its journal Social Choice and Welfare.

Volume (Year): 21 (2003)
Issue (Month): 1 (08)
Pages: 39-61

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Handle: RePEc:spr:sochwe:v:21:y:2003:i:1:p:39-61
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  1. Farrell, Joseph & Scotchmer, Suzanne, 1986. "Partnerships," Department of Economics, Working Paper Series qt49d211x4, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  2. Licun Xue, 1998. "Coalitional stability under perfect foresight," Economic Theory, Springer, vol. 11(3), pages 603-627.
  3. Dreze, J.H. & Greenberg, J., . "Hedonic coalitions: optimality and stability," CORE Discussion Papers RP -403, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  4. Demange, G., 1991. "Intermediate Preferences and Stable Coalition Structures," DELTA Working Papers 91-16, DELTA (Ecole normale supérieure).
  5. Hart, Sergiu & Kurz, Mordecai, 1983. "Endogenous Formation of Coalitions," Econometrica, Econometric Society, vol. 51(4), pages 1047-64, July.
  6. Greenberg, Joseph, 1994. "Coalition structures," Handbook of Game Theory with Economic Applications, in: R.J. Aumann & S. Hart (ed.), Handbook of Game Theory with Economic Applications, edition 1, volume 2, chapter 37, pages 1305-1337 Elsevier.
  7. Greenberg Joseph & Weber Shlomo, 1993. "Stable Coalition Structures with a Unidimensional Set of Alternatives," Journal of Economic Theory, Elsevier, vol. 60(1), pages 62-82, June.
  8. Tayfun Sönmez & Suryapratim Banerjee & Hideo Konishi, 2001. "Core in a simple coalition formation game," Social Choice and Welfare, Springer, vol. 18(1), pages 135-153.
  9. Demange, Gabrielle, 1982. "Single-peaked orders on a tree," Mathematical Social Sciences, Elsevier, vol. 3(4), pages 389-396, December.
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