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Farsighted Stability in Hedonic Games

Author

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  • Effrosyni Diamantoudi
  • Licun Xue

    (Department of Economics, University of Aarhus, Denmark)

Abstract

We investigate how rational individuals partition themselves into different coalitions in "hedonic games" [see Banerjee, Konishi and S”nmez (1998) and Bogomolnaia and Jackson (2000)], where individuals' preferences depend solely on the composition of the coalition they belong to. We show that the four solution concepts studied in the literature (core, Nash stability, individual stability and contractual individual stability) 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 show the existence and study the properties of the new solutions, as well as their relation to the previous notions.

Suggested Citation

  • Effrosyni Diamantoudi & Licun Xue, "undated". "Farsighted Stability in Hedonic Games," Economics Working Papers 2000-12, Department of Economics and Business Economics, Aarhus University.
    • Handle: RePEc:aah:aarhec:2000-12
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    References listed on IDEAS

    as
    1. Demange, Gabrielle, 1994. "Intermediate preferences and stable coalition structures," Journal of Mathematical Economics, Elsevier, vol. 23(1), pages 45-58, January.
    2. Joseph Farrell & Suzanne Scotchmer, 1988. "Partnerships," The Quarterly Journal of Economics, Oxford University Press, vol. 103(2), pages 279-297.
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    4. 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.
    5. Bogomolnaia, Anna & Jackson, Matthew O., 2002. "The Stability of Hedonic Coalition Structures," Games and Economic Behavior, Elsevier, vol. 38(2), pages 201-230, February.
    6. Tayfun Sönmez & Suryapratim Banerjee & Hideo Konishi, 2001. "Core in a simple coalition formation game," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 18(1), pages 135-153.
    7. Hart, Sergiu & Kurz, Mordecai, 1983. "Endogenous Formation of Coalitions," Econometrica, Econometric Society, vol. 51(4), pages 1047-1064, July.
    8. 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.
    9. Dreze, J H & Greenberg, J, 1980. "Hedonic Coalitions: Optimality and Stability," Econometrica, Econometric Society, vol. 48(4), pages 987-1003, May.
    10. Licun Xue, 1998. "Coalitional stability under perfect foresight," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 11(3), pages 603-627.
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    More about this item

    Keywords

    Hedonic games; coalition structures; foresight;
    All these keywords.

    JEL classification:

    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory

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