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Networks and farsighted stability

By Frank H. Page, Myrna Holtz Wooders and Samir Kamat

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 of individuals behave farsightedly

Topics: HD, HM
Publisher: University of Warwick, Department of Economics
Year: 2003
OAI identifier: oai:wrap.warwick.ac.uk:1498

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