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Strongly Stable Networks

  • Matthew O. Jackson

    (California Institute of Technology)

  • Anne van den Nouweland

    (University of Oregon)

We analyze the formation of networks among individuals. In particular, we examine the existence of networks that are stable against changes in links by any coalition of individuals. We show that to investigate the existence of such strongly stable networks one can restrict focus on a component-wise egalitarian allocation of value. We show that when such strongly stable networks exist they coincide with the set of efficient networks (those maximizing the total productive value). We show that the existence of strongly stable networks is equivalent to core existence in a derived cooperative game and use that result to characterize the class of value functions for which there exist strongly stable networks via a ``top convexity'' condition on the value function on networks. We also consider a variation on strong stability where players can make side payments, and examine situations where value functions may be non- anonymous -- depending on player labels.

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Paper provided by EconWPA in its series Microeconomics with number 0211006.

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Date of creation: 04 Nov 2002
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Handle: RePEc:wpa:wuwpmi:0211006
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  1. Robert P. Gilles & Cathleen Johnson, 2000. "original papers : Spatial social networks," Review of Economic Design, Springer, vol. 5(3), pages 273-299.
  2. Sergio Currarini & Massimo Morelli, 2000. "original papers : Network formation with sequential demands," Review of Economic Design, Springer, vol. 5(3), pages 229-249.
  3. 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).
  4. 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.
  5. Jackson, Matthew O. & Watts, Alison, 2002. "The Evolution of Social and Economic Networks," Journal of Economic Theory, Elsevier, vol. 106(2), pages 265-295, October.
  6. Dutta, Bhaskar & Mutuswami, Suresh, 1996. "Stable Networks," Working Papers 971, California Institute of Technology, Division of the Humanities and Social Sciences.
  7. Chatterjee, Kalyan & Bhaskar Dutta & Debraj Ray & Kunal Sengupta, 1993. "A Noncooperative Theory of Coalitional Bargaining," Review of Economic Studies, Wiley Blackwell, vol. 60(2), pages 463-77, April.
  8. Watts, Alison, 2001. "A Dynamic Model of Network Formation," Games and Economic Behavior, Elsevier, vol. 34(2), pages 331-341, February.
  9. 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.
  10. Roger B. Myerson, 1976. "Graphs and Cooperation in Games," Discussion Papers 246, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  11. Matthew O. Jackson & Asher Wolinsky, 1995. "A Strategic Model of Social and Economic Networks," Discussion Papers 1098R, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  12. Corominas-Bosch, Margarida, 2004. "Bargaining in a network of buyers and sellers," Journal of Economic Theory, Elsevier, vol. 115(1), pages 35-77, March.
  13. Matthew O. Jackson & Bhaskar Dutta, 2000. "original papers : The stability and efficiency of directed communication networks," Review of Economic Design, Springer, vol. 5(3), pages 251-272.
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