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Allocating value among farsighted players in network formation

Author

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  • Nicolas CARAYOL
  • Remi DELILLE
  • Vincent VANNETELBOSCH
Abstract
We propose a concept to study the stability of social and economic networks when players are farsighted and allocations are determined endogenously. A set of networks is a von Neumann-Morgenstern farsightedly stable set with bargaining if there exists an allocation rule and a bargaining threat such that (i) there is no farsighted improving path from one network inside the set to another network inside the set, (ii) from any network outside the set there is a farsighted improving path to some network inside the set, (iii) the value of each network is allocated among players so that players suffer or benefit equally from being linked to each other compared to the allocation they would obtain at their respective credible bargaining threat. We show that the set of strongly efficient networks is the unique von Neumann-Morgenstern farsightedly stable set with bargaining if the allocation rule is anonymous and component efficient and the value function is top convex. Moreover, the componentwise egalitarian allocation rule emerges endogenously.

Suggested Citation

  • Nicolas CARAYOL & Remi DELILLE & Vincent VANNETELBOSCH, 2014. "Allocating value among farsighted players in network formation," Cahiers du GREThA (2007-2019) 2014-05, Groupe de Recherche en Economie Théorique et Appliquée (GREThA).
    • Handle: RePEc:grt:wpegrt:2014-05
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    File URL: http://cahiersdugretha.u-bordeaux.fr/2014/2014-05.pdf
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    References listed on IDEAS

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    Cited by:

    1. Yangbo Song & Mihaela Schaar, 2020. "Dynamic network formation with foresighted agents," International Journal of Game Theory, Springer;Game Theory Society, vol. 49(2), pages 345-384, June.

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    More about this item

    Keywords

    Farsighted players; Stability; Equal bargaining power;
    All these keywords.

    JEL classification:

    • A14 - General Economics and Teaching - - General Economics - - - Sociology of Economics
    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • D20 - Microeconomics - - Production and Organizations - - - General

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