Farsighted Network Formation

Bhaskar Dutta, Sayantan Ghosal and Debraj Ray

No 122, Working papers from Centre for Development Economics, Delhi School of Economics

Abstract: This paper studies a model of dynamic network formation when individuals are farsighted : players evaluate the desirability of a “current” move in terms of its consequences on the entire discounted stream of payoffs. We define a concept of equilibrium which takes into account far-sighted behavior of agents and allows for limited cooperation amongst agents. We show that an equilibrium process of network formation exists. We also show that there are network structures in which no equilibrium strategy profile can sustain efficient networks. We then provide sufficient conditions under which the equilibrium process will yield efficient outcomes.

Keywords: Network formation; farsightedness; equilibrium; efficiency. (search for similar items in EconPapers)
JEL-codes: C7 D7 (search for similar items in EconPapers)
Pages: 49 pages
Date: 2004-03
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Journal Article: Farsighted network formation (2005)
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