Pairwise-Stability and Nash Equilibria in Network Formation
Data
01.01.2005
01.01.2005
Autori
Antoni Calvó-Armengol, Rahmi Ilkiliç
Codice JEL
C62,C72,D85,L14
C62,C72,D85,L14
Parole chiave:
Network formation,Pairwise-stability,Proper equilibrium
Network formation,Pairwise-stability,Proper equilibrium
Publisher
Climate Change and Sustainable Development
Climate Change and Sustainable Development
Editor
Carlo Carraro
Carlo Carraro
Suppose that individual payoffs depend on the network connecting them. Consider the following simultaneous move game of network formation: players announce independently the links they wish to form, and links are formed only under mutual consent. We provide necessary and sufficient conditions on the network link marginal payoffs such that the set of pairwise stable, pairwise-Nash and proper equilibrium networks coincide, where pairwise stable networks are robust to one-link deviations, while pairwise-Nash networks are robust to one-link creation but multi-link severance. Under these conditions, proper equilibria in pure strategies are fully characterized by one-link deviation checks.