The Formation of Networks with Side Payments
We examine the formation of networks among a set of players whose payoffs depend on the structure of the network. We focus on games where players may promise or demand transfer payments when forming links. If players may only make such transfers on the links they are directly involved with, then there are many settings where inefficient networks are the only equilibrium outcomes, and we fully characterize the supportable networks. If externalities are nonpositive and a convexity condition is satisfied, then efficient networks are supportable as equilibria with such direct transfers. If players can also make positive transfers to pay for links they are not involved with, then a convexity condition alone is sufficient for an efficient network to be supportable as an equilibrium. In cases where transfers can be made contingent on the network, then any efficient network is supportable as an equilibrium. We also consider a refinement of equilibrium that allows pairs of players to coordinate their promises and demands on a link. If players can make payments to prevent the formation of a link as well as to form it, then all efficient networks are supportable via the pairwise equilibrium refinement
|Date of creation:||11 Aug 2004|
|Date of revision:|
|Contact details of provider:|| Phone: 1 212 998 3820|
Fax: 1 212 995 4487
Web page: http://www.econometricsociety.org/pastmeetings.asp
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Dutta, Bhaskar & Mutuswami, Suresh, 1997.
Journal of Economic Theory,
Elsevier, vol. 76(2), pages 322-344, October.
- Matthew O. Jackson & Asher Wolinsky, 1995.
"A Strategic Model of Social and Economic Networks,"
1098R, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Slikker, Marco & van den Nouweland, Anne, 2001.
"A One-Stage Model of Link Formation and Payoff Division,"
Games and Economic Behavior,
Elsevier, vol. 34(1), pages 153-175, January.
- Slikker, M. & van den Nouweland, C.G.A.M., 1997. "A One-Stage Model of Link Formation and Payoff Division," Discussion Paper 1997-23, Tilburg University, Center for Economic Research.
- Dutta, Bhaskar & Ghosal, Sayantan & Ray, Debraj, 2005.
"Farsighted network formation,"
Journal of Economic Theory,
Elsevier, vol. 122(2), pages 143-164, June.
- Page Jr, Frank H & Wooders, Myrna H & Kamat, Samir, 2001.
"Networks And Farsighted Stability,"
The Warwick Economics Research Paper Series (TWERPS)
621, University of Warwick, Department of Economics.
- Samir Kamat & Frank Page & Myrna Wooders, 2004. "Networks and Farsighted Stability," Econometric Society 2004 North American Winter Meetings 561, Econometric Society.
- 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.
- Page Jr. Frank H & Wooders, Myrna & Kamat, Samir, 2003. "Networks and Farsighted Stability," The Warwick Economics Research Paper Series (TWERPS) 689, University of Warwick, Department of Economics.
- 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.
- MUTUSWAMI, Suresh & WINTER, Eyal, 2000.
"Subscription mechanisms for network formation,"
CORE Discussion Papers
2000020, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Roger B. Myerson, 1976. "Graphs and Cooperation in Games," Discussion Papers 246, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
When requesting a correction, please mention this item's handle: RePEc:ecm:nasm04:198. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christopher F. Baum)
If references are entirely missing, you can add them using this form.