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Farsightedly stable networks

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

    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Department of Economics)

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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Paper provided by Université catholique de Louvain, Département des Sciences Economiques in its series Discussion Papers (ECON - Département des Sciences Economiques) with number 2006046.

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Length: 29
Date of creation: 01 Oct 2006
Date of revision:
Handle: RePEc:ctl:louvec:2006046
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  1. Bhaskar Dutta & Sayantan Ghosal & Debraj Ray, 2004. "Farsighted Network Formation," Working papers 122, Centre for Development Economics, Delhi School of Economics.
  2. Antoni Calvó-Armengol & Yves Zenou, 2003. "Social Networks and Crime Decisions: The Role of Social Structure in Facilitating Delinquent Behavior," Working Papers 52, Barcelona Graduate School of Economics.
  3. Page Jr., Frank H. & Wooders, Myrna, 2009. "Strategic basins of attraction, the path dominance core, and network formation games," Games and Economic Behavior, Elsevier, vol. 66(1), pages 462-487, May.
  4. Page Jr, Frank H & Wooders, Myrna H. & Kamat, Samir, 2002. "Networks And Farsighted Stability," The Warwick Economics Research Paper Series (TWERPS) 660, University of Warwick, Department of Economics.
  5. Watts, Alison, 2001. "A Dynamic Model of Network Formation," Games and Economic Behavior, Elsevier, vol. 34(2), pages 331-341, February.
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  7. 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.
  8. 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.
  9. A Bhattacharya, . "Stable and Efficient Networks with Farsighted Players: the Largest Consistent Set," Discussion Papers 09/34, Department of Economics, University of York.
  10. Vincent Vannetelbosch & Olivier Tercieux, 2005. "A Characterization of Stochastically Stable Networks," Working Papers 2005.48, Fondazione Eni Enrico Mattei.
  11. Watts, Alison, 2002. "Non-myopic formation of circle networks," Economics Letters, Elsevier, vol. 74(2), pages 277-282, January.
  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. Jackson, Matthew O. & van den Nouweland, Anne, 2005. "Strongly stable networks," Games and Economic Behavior, Elsevier, vol. 51(2), pages 420-444, May.
  14. Ana Mauleon & Vincent Vannetelbosch, 2004. "Farsightedness and Cautiousness in Coalition Formation Games with Positive Spillovers," Theory and Decision, Springer, vol. 56(3), pages 291-324, 05.
  15. Chwe Michael Suk-Young, 1994. "Farsighted Coalitional Stability," Journal of Economic Theory, Elsevier, vol. 63(2), pages 299-325, August.
  16. Dutta, Bhaskar & Mutuswami, Suresh, 1996. "Stable Networks," Working Papers 971, California Institute of Technology, Division of the Humanities and Social Sciences.
  17. Licun Xue, 1998. "Coalitional stability under perfect foresight," Economic Theory, Springer, vol. 11(3), pages 603-627.
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