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Farsightedly Stable Networks

  • Herings P. Jean-Jacques
  • Mauleon Ana
  • Vannetelbosch Vincent

    (METEOR)

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 ∈ G to a network outside G are deterred by the threat of ending 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 farsighted stability yields a Pareto dominating network, if it exists, as the unique outcome. Finally, we study the relationship between pairwise farsighted stability and other concepts such as the largest consistent set.

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File URL: http://digitalarchive.maastrichtuniversity.nl/fedora/objects/guid:a2f206ff-6a1c-4936-b557-0d963d64e1f7/datastreams/ASSET1/content
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Paper provided by Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR) in its series Research Memorandum with number 041.

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Date of creation: 2006
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Handle: RePEc:unm:umamet:2006041
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  1. Licun Xue, 1998. "Coalitional stability under perfect foresight," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 11(3), pages 603-627.
  2. TERCIEUX, Olivier & VANNETELBOSCH, Vincent, 2004. "A characterization of stochastically stable networks," CORE Discussion Papers 2004056, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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  7. 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).
  8. Bhaskar Dutta & Sayantan Ghosal & Debraj Ray, 2004. "Farsighted Network Formation," Working papers 122, Centre for Development Economics, Delhi School of Economics.
  9. 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.
  10. 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.
  11. 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.
  12. Antoni Calvó-Armengol & Yves Zenou, 2004. "Social Networks And Crime Decisions: The Role Of Social Structure In Facilitating Delinquent Behavior," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 45(3), pages 939-958, 08.
  13. Watts, Alison, 2002. "Non-myopic formation of circle networks," Economics Letters, Elsevier, vol. 74(2), pages 277-282, January.
  14. MAULEON, Ana & VANNETELBOSCH, Vincent, . "Farsightedness and cautiousness in coalition formation games with positive spillovers," CORE Discussion Papers RP 1729, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  15. Watts, Alison, 2001. "A Dynamic Model of Network Formation," Games and Economic Behavior, Elsevier, vol. 34(2), pages 331-341, February.
  16. Chwe Michael Suk-Young, 1994. "Farsighted Coalitional Stability," Journal of Economic Theory, Elsevier, vol. 63(2), pages 299-325, August.
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