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Farsightedly stable networks

  • HERINGS, Jean-Jacques
  • MAULEON, Ana
  • VANNETELBOSCH, Vincent

We propose a new concept, the pairwise farsightedly stable set, in order to predict which networks may be formed among farsighted players. A set of networks G is pairwise farsightedly stable (i) if all possible pairwise deviations from any network g E G to a network outside G are deterred by the threat of endind worse off or equally well off, (ii) if there exists a farsightedly improving path from any network outside the set leading to some network in the set, and (iii) if there is no proper subset of G satisfying (i) and (ii). We show that a non-empty pairwise farsightedly stable set always exists and we provide a full characterization of unique pairwise farsightedly stable sets of networks. Contrary to other pairwise concepts, pairwise farsightedly yields a Pareto dominating betwork, if it exists, as the unique outcome. Finally, we study the relationship between pairwise farsightedly stability and other concepts such as the largest consistent set.

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File URL: http://dx.doi.org/10.1016/j.geb.2008.12.009
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Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers RP with number 2171.

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Handle: RePEc:cor:louvrp:2171
Note: In : Games and Economic Behavior, 67(2), 526-541, 2009
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  1. Frank H. Page Jr. & Myrna H. Wooders & Samir Kamat, 2002. "Networks and Farsighted Stability," Computing in Economics and Finance 2002 370, Society for Computational Economics.
  2. Jackson, Matthew O. & van den Nouweland, Anne, 2005. "Strongly stable networks," Games and Economic Behavior, Elsevier, vol. 51(2), pages 420-444, May.
  3. Herings, P. Jean-Jacques & Mauleon, Ana & Vannetelbosch, Vincent J., 2004. "Rationalizability for social environments," Games and Economic Behavior, Elsevier, vol. 49(1), pages 135-156, October.
  4. Chwe Michael Suk-Young, 1994. "Farsighted Coalitional Stability," Journal of Economic Theory, Elsevier, vol. 63(2), pages 299-325, August.
  5. MAULEON, Ana & VANNETELBOSCH, Vincent, . "Farsightedness and cautiousness in coalition formation games with positive spillovers," CORE Discussion Papers RP 1729, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  6. Antoni Calvó-Armengol & Yves Zenou, 2004. "Social Networks And Crime Decisions: The Role Of Social Structure In Facilitating Delinquent Behavior," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 45(3), pages 939-958, 08.
  7. A Bhattacharya, . "Stable and Efficient Networks with Farsighted Players: the Largest Consistent Set," Discussion Papers 09/34, Department of Economics, University of York.
  8. Bhaskar Dutta & Sayantan Ghosal & Debraj Ray, 2004. "Farsighted Network Formation," Working papers 122, Centre for Development Economics, Delhi School of Economics.
  9. Jackson, Matthew O. & Watts, Alison, 2002. "The Evolution of Social and Economic Networks," Journal of Economic Theory, Elsevier, vol. 106(2), pages 265-295, October.
  10. 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.
  11. Dutta, Bhaskar & Mutuswami, Suresh, 1997. "Stable Networks," Journal of Economic Theory, Elsevier, vol. 76(2), pages 322-344, October.
    • Dutta, Bhaskar & Mutuswami, Suresh, 1996. "Stable Networks," Working Papers 971, California Institute of Technology, Division of the Humanities and Social Sciences.
  12. Sengupta, Abhijit & Sengupta, Kunal, 1994. "Viable Proposals," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 35(2), pages 347-59, May.
  13. TERCIEUX, Olivier & VANNETELBOSCH, Vincent, 2004. "A characterization of stochastically stable networks," CORE Discussion Papers 2004056, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  14. Watts, Alison, 2001. "A Dynamic Model of Network Formation," Games and Economic Behavior, Elsevier, vol. 34(2), pages 331-341, February.
  15. Watts, Alison, 2002. "Non-myopic formation of circle networks," Economics Letters, Elsevier, vol. 74(2), pages 277-282, January.
  16. 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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