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Farsightedly stable networks

  • Jean-Jacques, HERINGS
  • Ana, MAULEON

    (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. HERINGS, Jean-Jacques & MAULEON, Ana & ANNETELBOSCH, Vincent J., . "Rationalizability for social environments," CORE Discussion Papers RP 1718, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  2. Watts, Alison, 2001. "A Dynamic Model of Network Formation," Games and Economic Behavior, Elsevier, vol. 34(2), pages 331-341, February.
  3. Jackson, Matthew O. & van den Nouweland, Anne, 2005. "Strongly stable networks," Games and Economic Behavior, Elsevier, vol. 51(2), pages 420-444, May.
  4. 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.
  5. Jackson, Matthew O. & Wolinsky, Asher, 1996. "A Strategic Model of Social and Economic Networks," Journal of Economic Theory, Elsevier, vol. 71(1), pages 44-74, October.
  6. Olivier Tercieux & Vincent Vannetelbosch, 2006. "A characterization of stochastically stable networks," International Journal of Game Theory, Springer, vol. 34(3), pages 351-369, October.
  7. Licun Xue, 1998. "Coalitional stability under perfect foresight," Economic Theory, Springer, vol. 11(3), pages 603-627.
  8. 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.
  9. Jackson, Matthew O., 1998. "The Evolution of Social and Economic Networks," Working Papers 1044, California Institute of Technology, Division of the Humanities and Social Sciences.
  10. Watts, Alison, 2002. "Non-myopic formation of circle networks," Economics Letters, Elsevier, vol. 74(2), pages 277-282, January.
  11. Dutta, Bhaskar & Ghosal, Sayantan & Ray, Debraj, 2005. "Farsighted network formation," Journal of Economic Theory, Elsevier, vol. 122(2), pages 143-164, June.
  12. Calvó-Armengol, Antoni & Zenou, Yves, 2003. "Social Networks and Crime Decisions: The Role of Social Structure in Facilitating Delinquent Behavior," Working Paper Series 601, Research Institute of Industrial Economics.
  13. 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.
  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. A Bhattacharya, . "Stable and Efficient Networks with Farsighted Players: the Largest Consistent Set," Discussion Papers 09/34, Department of Economics, University of York.
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