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Pairwise-Stability and Nash Equilibria in Network Formation

Antoni Calvó-Armengol and Rahmi İlkılıç

No 182, Working Papers from Barcelona Graduate School of Economics

Abstract: 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.

Keywords: network formation; pairwise-stability; proper equilibrium (search for similar items in EconPapers)
JEL-codes: C62 C72 D85 L14 (search for similar items in EconPapers)
Date: 2004-04
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Related works:
Journal Article: Pairwise-stability and Nash equilibria in network formation (2009) Downloads
Working Paper: Pairwise-Stability and Nash Equilibria in Network Formation (2005) Downloads
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