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Networks and Farsighted Stability

Author

Listed:
  • Page, Frank H., Jr.
  • Wooders, Myrna
  • Kamat, Samir
Abstract
We make two main contributions to the theory of economic and social network formation. First, we introduce the notion of a network formation network or a supernetwork. Supernetworks provide a framework in which we can formally define and analyze farsightedness in network formation. Second, we introduce a new notion of equilibrium corresponding to farsightedness. In particular, we introduce the notion of a farsightedly basic network, as well as the notion of a farsighted basis, and we show that all supernetworks possess a farsighted basis. A farsightedly basic network contained in the farsighted basis of a given supernetwork represents a possible final resting point (or absorbing state) of a network formation process in which agents behave farsightedly. Given the supernetwork representation of the rules governing network formation and the preferences of the individuals, a farsighted basis contains networks which are likely to emerge and persist if individuals behave farsightedly.

Suggested Citation

  • Page, Frank H., Jr. & Wooders, Myrna & Kamat, Samir, 2003. "Networks and Farsighted Stability," Economic Research Papers 269573, University of Warwick - Department of Economics.
    • Handle: RePEc:ags:uwarer:269573
    DOI: 10.22004/ag.econ.269573
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    Keywords

    Agricultural and Food Policy; Public Economics; Research Methods/ Statistical Methods;
    All these keywords.

    JEL classification:

    • C60 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - General

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