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Strategic Basins of Attraction, the Farsighted Core, and Network Formation Games

dc.contributor.authorPage, Frank H.
dc.contributor.authorWooders, Myrna H.
dc.date.accessioned2020-09-13T21:32:33Z
dc.date.available2020-09-13T21:32:33Z
dc.date.issued2005
dc.identifier.urihttp://hdl.handle.net/1803/15797
dc.description.abstractWe make four main contributions to the theory of network formation. (1) The problem of network formation with farsighted agents can be formulated as an abstract network formation game. (2) In any farsighted network formation game the feasible set of networks contains a unique, finite, disjoint collection of nonempty subsets having the property that each subset forms a strategic basin of attraction. These basins of attraction contain all the networks that are likely to emerge and persist if individuals behave farsightedly in playing the network formation game. (3) A von Neumann Morgenstern stable set of the farsighted network formation game is constructed by selecting one network from each basin of attraction. We refer to any such von Neumann-Morgenstern stable set as a farsighted basis. (4) The core of the farsighted network formation game is constructed by selecting one network from each basin of attraction containing a single network. We call this notion of the core, the farsighted core. We conclude that the farsighted core is nonempty if and only if there exists at least one farsighted basin of attraction containing a single network. To relate our three equilibrium and stability notions (basins of attraction, farsighted basis, and farsighted core) to recent work by Jackson and Wolinsky (1996), we define a notion of pairwise stability similar to the Jackson-Wolinsky notion and we show that the farsighted core is contained in the set of pairwise stable networks. Finally, we introduce, via an example, competitive contracting networks and highlight how the analysis of these networks requires the new features of our network formation model.
dc.language.isoen_US
dc.publisherVanderbilt Universityen
dc.subjectNetworks
dc.subjectbasin of attraction
dc.subjectfarsighted core
dc.subjectnetwork formation
dc.subjectstrategic basins of attraction
dc.subjectJEL Classification Number: C71
dc.subjectJEL Classification Number: C72
dc.subject.other
dc.titleStrategic Basins of Attraction, the Farsighted Core, and Network Formation Games
dc.typeWorking Paperen
dc.description.departmentEconomics


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