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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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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. 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.
  2. 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.
  3. Frank Page & Myrna Wooders, 2007. "Strategic Basins of Attraction, the Path Dominance Core, and Network Formation Games," Caepr Working Papers 2007-020, Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington.
  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. Watts, Alison, 2001. "A Dynamic Model of Network Formation," Games and Economic Behavior, Elsevier, vol. 34(2), pages 331-341, February.
  6. 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.
  7. Vincent Vannetelbosch & Olivier Tercieux, 2005. "A Characterization of Stochastically Stable Networks," Working Papers 2005.48, Fondazione Eni Enrico Mattei.
  8. Antoni Calvó-Armengol & Yves Zenou, 2003. "Social Networks and Crime Decisions: The Role of Social Structure in Facilitating Delinquent Behavior," Working Papers 52, Barcelona Graduate School of Economics.
  9. Ana Mauleon & Vincent Vannetelbosch, 2004. "Farsightedness and Cautiousness in Coalition Formation Games with Positive Spillovers," Theory and Decision, Springer, vol. 56(3), pages 291-324, 05.
  10. 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.
  11. Bhaskar Dutta & Sayantan Ghosal & Debraj Ray, 2004. "Farsighted Network Formation," Working papers 122, Centre for Development Economics, Delhi School of Economics.
  12. Dutta, Bhaskar & Mutuswami, Suresh, 1997. "Stable Networks," Journal of Economic Theory, Elsevier, vol. 76(2), pages 322-344, October.
    • Dutta, Bhaskar & Mutuswami, Suresh, 1996. "Stable Networks," Working Papers 971, California Institute of Technology, Division of the Humanities and Social Sciences.
  13. A Bhattacharya, . "Stable and Efficient Networks with Farsighted Players: the Largest Consistent Set," Discussion Papers 09/34, Department of Economics, University of York.
  14. Chwe Michael Suk-Young, 1994. "Farsighted Coalitional Stability," Journal of Economic Theory, Elsevier, vol. 63(2), pages 299-325, August.
  15. Watts, Alison, 2002. "Non-myopic formation of circle networks," Economics Letters, Elsevier, vol. 74(2), pages 277-282, January.
  16. Licun Xue, 1998. "Coalitional stability under perfect foresight," Economic Theory, Springer, vol. 11(3), pages 603-627.
  17. 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.
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