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Network Formation with Sequential Demands

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Abstract

This paper introduces a non-cooperative game-theoretic model of sequential network formation, in which players propose links and demand payoffs. Payoff division is therefore endogenous. We show that if the value of networks satisfies size-monotonicity, then each and every equilibrium network is efficient. Formation of networks satisfies size-monotonicity, then each and equilibrium network is efficient. Formation of networks through bilateral every negotiations (link-specific demands) and through absolute participation demands turn out to have the same efficiency properties. The result do not extend to the case in which players can only demand relative shares

Suggested Citation

  • Sergio Currarini & Massimo Morelli, 2000. "Network Formation with Sequential Demands," Royal Holloway, University of London: Discussion Papers in Economics 99/2, Department of Economics, Royal Holloway University of London, revised Feb 2000.
  • Handle: RePEc:hol:holodi:9902
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    File URL: http://www.rhul.ac.uk/economics/Research/WorkingPapers/pdf/dpe9902.pdf
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    Cited by:

    1. Navarro Prada, Noemí, 2013. "Forward-looking Pairwise Stability in Networks with Externalities," IKERLANAK Ikerlanak;2013-71, Universidad del País Vasco - Departamento de Fundamentos del Análisis Económico I.
    2. Noemí Navarro, 2014. "Expected fair allocation in farsighted network formation," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 43(2), pages 287-308, August.

    More about this item

    Keywords

    Link Formation; Efficient Networks; Graphs; Payoff Division;

    JEL classification:

    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory

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