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Contractually stable networks

  • Jean-François Caulier

    ()

    (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne)

  • A. Mauleon

    (CORE - Center of Operation Research and Econometrics [Louvain] - Université Catholique de Louvain (UCL) - Belgique)

  • Vincent Vannetelbosch

    ()

    (CORE - Center of Operation Research and Econometrics [Louvain] - Université Catholique de Louvain (UCL) - Belgique)

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, where the network speciÖes the nature 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 equilibrium 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 e¢ ciency.

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Paper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number hal-00633611.

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Date of creation: May 2013
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Publication status: Published, International Journal of Game Theory, 2013, 42, 2, 483-499
Handle: RePEc:hal:cesptp:hal-00633611
Note: View the original document on HAL open archive server: http://hal.archives-ouvertes.fr/hal-00633611
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  1. 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.
  2. 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.
  3. Sumit Joshi, 2000. "Networks of Collaboration in Oligopoly," Econometric Society World Congress 2000 Contributed Papers 0623, Econometric Society.
  4. 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).
  5. Francis Bloch, 1995. "Endogenous Structures of Association in Oligopolies," RAND Journal of Economics, The RAND Corporation, vol. 26(3), pages 537-556, Autumn.
  6. 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.
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