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Farsighted Network Formation

Listed author(s):
  • Bhaskar Dutta

    (University of Warwick)

  • Sayantan Ghosal

    (University of Warwick)

  • Debraj Ray

    (University of New York)

This paper studies a model of dynamic network formation when individuals are farsighted : players evaluate the desirability of a “current” move in terms of its consequences on the entire discounted stream of payoffs. We define a concept of equilibrium which takes into account far-sighted behavior of agents and allows for limited cooperation amongst agents. We show that an equilibrium process of network formation exists. We also show that there are network structures in which no equilibrium strategy profile can sustain efficient networks. We then provide sufficient conditions under which the equilibrium process will yield efficient outcomes.

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Paper provided by Centre for Development Economics, Delhi School of Economics in its series Working papers with number 122.

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Length: 49 pages
Date of creation: Mar 2004
Handle: RePEc:cde:cdewps:122
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  11. Tesfatsion, Leigh S., 1998. "Gale-Shapley Matching in an Evolutionary Trade Network Game," Staff General Research Papers Archive 1230, Iowa State University, Department of Economics.
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  14. Konishi, Hideo & Ray, Debraj, 2003. "Coalition formation as a dynamic process," Journal of Economic Theory, Elsevier, vol. 110(1), pages 1-41, May.
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    • Dutta, Bhaskar & Mutuswami, Suresh, 1996. "Stable Networks," Working Papers 971, California Institute of Technology, Division of the Humanities and Social Sciences.
  17. Adsera, Alicia & Ray, Debraj, 1998. "History and Coordination Failure," Journal of Economic Growth, Springer, vol. 3(3), pages 267-276, September.
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  19. Timothy G. Conley & Christopher R. Udry, 2010. "Learning about a New Technology: Pineapple in Ghana," American Economic Review, American Economic Association, vol. 100(1), pages 35-69, March.
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  21. Goyal, Sanjeev & Joshi, Sumit, 2003. "Networks of collaboration in oligopoly," Games and Economic Behavior, Elsevier, vol. 43(1), pages 57-85, April.
  22. Rachel E. Kranton & Deborah F. Minehart, 1999. "Competition for Goods in Buyer-Seller Networks," Cowles Foundation Discussion Papers 1232, Cowles Foundation for Research in Economics, Yale University.
  23. Ragunathan V, 1994. "IIMA Today - A Case of Depleted Networth," IIMA Working Papers WP1994-04-01_01259, Indian Institute of Management Ahmedabad, Research and Publication Department.
  24. Goyal, Sanjeev & Joshi, Sumit, 2003. "Networks of collaboration in oligopoly," Games and Economic Behavior, Elsevier, vol. 43(1), pages 57-85, April.
  25. Leigh TESFATSION, 1995. "A Trade Network Game With Endogenous Partner Selection," Economic Report 36, Iowa State University Department of Economics.
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  27. (*), Anne van den Nouweland & Marco Slikker, 2000. "original papers : Network formation models with costs for establishing links," Review of Economic Design, Springer;Society for Economic Design, vol. 5(3), pages 333-362.
  28. Matthew O. Jackson & Bhaskar Dutta, 2000. "original papers : The stability and efficiency of directed communication networks," Review of Economic Design, Springer;Society for Economic Design, vol. 5(3), pages 251-272.
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