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Network formation with myopic and farsighted players

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  • LUO Chenghong,

    (CORE, Université catholique de Louvain)

  • MAULEON Ana,

    (Université Saint-Louis Bruxelles and CORE)

  • VANNETELBOSCH Vincent,

    (CORE, Université catholique de Louvain)

Abstract

We study the formation of networks where myopic and farsighted individuals decide with whom they want to form a link, according to a distance-based utility function that weighs the costs and benefits of each connection. We propose the notion of myopic-farsighted stable set to determine the networks that emerge when some individuals are myopic while others are farsighted. A myopic-farsighted stable set is the set of networks satisfying internal and external stability with respect to the notion of myopic-farsighted improving path. In the case of a homogeneous population (either all myopic or all farsighted), a conflict between stability and efficiency is likely to arise. But, once the population becomes mixed, the conflict vanishes if there are enough farsighted individuals. In addition, we characterize the myopic-farsighted stable set for any utility function when all individuals are myopic.

Suggested Citation

  • LUO Chenghong, & MAULEON Ana, & VANNETELBOSCH Vincent,, 2018. "Network formation with myopic and farsighted players," LIDAM Discussion Papers CORE 2018025, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  • Handle: RePEc:cor:louvco:2018025
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    Cited by:

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    3. P. Jean-Jacques Herings & Ana Mauleon & Vincent Vannetelbosch, 2023. "Social Rationalizability with Mediation," Dynamic Games and Applications, Springer, vol. 13(2), pages 440-461, June.
    4. David Pérez-Castrillo & Marilda Sotomayor, 2023. "Constrained-optimal tradewise-stable outcomes in the one-sided assignment game: a solution concept weaker than the core," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 76(3), pages 963-994, October.
    5. Pierre de Callataÿ & Ana Mauleon & Vincent Vannetelbosch, 2023. "Myopic-farsighted absorbing networks," Theory and Decision, Springer, vol. 94(3), pages 405-422, April.
    6. Péter Bayer & Ani Guerdjikova, 2020. "Optimism leads to optimality: Ambiguity in network formation," Working Papers hal-03005107, HAL.
    7. Chenghong Luo & Ana Mauleon & Vincent Vannetelbosch, 2022. "Coalition-proof stable networks," Review of Economic Design, Springer;Society for Economic Design, vol. 26(2), pages 185-209, June.
    8. Mauleon, Ana & Sempere-Monerris, Jose J. & Vannetelbosch, Vincent, 2023. "R&D network formation with myopic and farsighted firms," Journal of Economic Behavior & Organization, Elsevier, vol. 208(C), pages 203-229.
    9. Bayer, Péter & Herings, P. Jean-Jacques & Peeters, Ronald, 2021. "Farsighted manipulation and exploitation in networks," Journal of Economic Theory, Elsevier, vol. 196(C).
    10. Ata Atay & Ana Mauleon & Vincent Vannetelbosch, 2022. "Limited farsightedness in priority-based matching," UB School of Economics Working Papers 2022/438, University of Barcelona School of Economics.
    11. Ana Mauleon & Jose J. Sempere-Monerris & Vincent Vannetelbosch, 2023. "Limited Farsightedness in R &D Network Formation," Dynamic Games and Applications, Springer, vol. 13(2), pages 549-565, June.
    12. Teruyoshi Kobayashi & Tomokatsu Onaga, 2023. "Dynamics of diffusion on monoplex and multiplex networks: a message-passing approach," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 76(1), pages 251-287, July.
    13. de Callatay, Pierre & Mauleon, Ana & Vannetelbosch, Vincent, 2021. "Minimally Farsighted Unstable Networks," LIDAM Discussion Papers CORE 2021012, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    14. Luo, Chenghong & Mauleon, Ana & Vannetelbosch, Vincent, 2022. "Friendship networks with farsighted agents," LIDAM Discussion Papers CORE 2022021, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).

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    More about this item

    Keywords

    networks; stable sets; myopic and farsighted players; distance-based utility;
    All these keywords.

    JEL classification:

    • A14 - General Economics and Teaching - - General Economics - - - Sociology of Economics
    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • D20 - Microeconomics - - Production and Organizations - - - General

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