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Contractually stable networks

  • Jean-François, CAULIER
  • Ana, MAULEON
  • Vincent, VANNETELBOSCH

    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Department of Economics)

We develop a theoretical framework that allows us to study which bilateral links and coalition structures are going to emerge at equilibrium. We define the notion of coalitional network to represent a network and a coalition structure, whre the network specifies the natyure of the relationship each individual has with his coalition members and with individuals outside his coalition. To predict the coalitional networks that are going to emerge at equiibrium we propose the concept of contractual stability which requires that any change made to the coalitional network needs the consent of both the deviating players and their original coalition partners. We show that there always exists a contractually stable coalitional network under the simple majority decision rule and the component-wise egalitarian or majoritarian allocation rules. Moreover, requiring the consent of group members may help to reconcile stability and efficiency

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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 2008045.

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Length: 28
Date of creation: 01 Nov 2008
Date of revision:
Handle: RePEc:ctl:louvec:2008045
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  1. Matthew O. Jackson, 2001. "Strongly Stable Networks," University of Oregon Economics Department Working Papers 2001-3, University of Oregon Economics Department, revised 15 Nov 2002.
  2. Frank H. Page, Jr. & Myrna H. Wooders, 2006. "Strategic Basins of Attraction, the Path Dominance Core, and Network Formation Games," Vanderbilt University Department of Economics Working Papers 0614, Vanderbilt University Department of Economics.
  3. Francis Bloch, 1995. "Endogenous Structures of Association in Oligopolies," RAND Journal of Economics, The RAND Corporation, vol. 26(3), pages 537-556, Autumn.
  4. Furusawa, Taiji & Konishi, Hideo, 2007. "Free trade networks," Journal of International Economics, Elsevier, vol. 72(2), pages 310-335, July.
  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. Rachel E. Kranton & Deborah F. Minehart, 2000. "Networks versus Vertical Integration," RAND Journal of Economics, The RAND Corporation, vol. 31(3), pages 570-601, Autumn.
  7. Sumit Joshi, 2000. "Networks of Collaboration in Oligopoly," Econometric Society World Congress 2000 Contributed Papers 0623, Econometric Society.
  8. Sang-Seung, Yi, 1996. "Endogenous formation of customs unions under imperfect competition: open regionalism is good," Journal of International Economics, Elsevier, vol. 41(1-2), pages 153-177, August.
  9. Mauleon, Ana & Sempere-Monerris, Jose J. & Vannetelbosch, Vincent J., 2011. "Networks of manufacturers and retailers," Journal of Economic Behavior & Organization, Elsevier, vol. 77(3), pages 351-367, March.
  10. Page Jr., Frank H. & Wooders, Myrna, 2010. "Club networks with multiple memberships and noncooperative stability," Games and Economic Behavior, Elsevier, vol. 70(1), pages 12-20, September.
  11. Dreze, J.H. & Greenberg, J., . "Hedonic coalitions: optimality and stability," CORE Discussion Papers RP -403, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  12. 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).
  13. 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.
  14. Goyal, S. & Joshi, S., 1999. "Bilateralism and free trade," Econometric Institute Research Papers EI 9953-/A, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
  15. Ping Wang & Alison Watts, 2006. "Formation of buyer-seller trade networks in a quality-differentiated product market," Canadian Journal of Economics, Canadian Economics Association, vol. 39(3), pages 971-1004, August.
  16. Rachel E. Kranton & Deborah F. Minehart, 2001. "A Theory of Buyer-Seller Networks," American Economic Review, American Economic Association, vol. 91(3), pages 485-508, June.
  17. Dutta, Bhaskar & Mutuswami, Suresh, 1996. "Stable Networks," Working Papers 971, California Institute of Technology, Division of the Humanities and Social Sciences.
  18. Goyal, S. & Joshi, S., 2000. "Networks of Collaboration in Oligopoly," Econometric Institute Research Papers EI 9952-/A, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
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