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Contractually stable networks

Jean-François Caulier (), Ana Mauleon and Vincent Vannetelbosch

No 2008045, Discussion Papers (ECON - Département des Sciences Economiques) from Université catholique de Louvain, Département des Sciences Economiques

Abstract: We develop a theoretical framework that allows us to study which bilateral links and coalition structures are going to emerge at equilibrium. We define the notion of coalitional network to represent a network and a coalition structure, whre the network specifies the natyure of the relationship each individual has with his coalition members and with individuals outside his coalition. To predict the coalitional networks that are going to emerge at equiibrium we propose the concept of contractual stability which requires that any change made to the coalitional network needs the consent of both the deviating players and their original coalition partners. We show that there always exists a contractually stable coalitional network under the simple majority decision rule and the component-wise egalitarian or majoritarian allocation rules. Moreover, requiring the consent of group members may help to reconcile stability and efficiency

Keywords: Networks; coaliation structures; contractual stability; allocation rules (search for similar items in EconPapers)
JEL-codes: A14 C70 (search for similar items in EconPapers)
Pages: 28
Date: 2008-11-01
New Economics Papers: this item is included in nep-cdm, nep-gth, nep-net and nep-soc
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