Stability and Equilibrium Selection in a Link Formation Game

Rodrigo J. Harrison and Roberto Munoz
Additional contact information
Rodrigo J. Harrison: UTFSM Chile and Georgetown University USA
Roberto Munoz: University of Maryland

Game Theory and Information from University Library of Munich, Germany

Abstract: In this paper we use a non cooperative equilibrium selection approach as a notion of stability in link formation games. Specifically, we follow the global games approach first introduced by Carlsson and van Damme (1993), to study the robustness of the set of Nash equilibria for a class of link formation games in strategic form with supermodular payoff functions. Interestingly, the equilibrium selected is in conflict with those predicted by the traditional cooperative refinements. Moreover, we get a conflict between stability and efficiency even when no such conflict exists with the cooperative refinements. We discuss some practical issues that these different theoretical approaches raise in reality. The paper also provides an extension of the global game theory that can be applied beyond network literature.

Keywords: Global Games; Equilibrium Selection; Networks. (search for similar items in EconPapers)
JEL-codes: C70 D20 D82 (search for similar items in EconPapers)
Pages: 45 pages
Date: 2003-06-25
New Economics Papers: this item is included in nep-gth
Note: Type of Document - Acrobat PDF; pages: 45
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://econwpa.ub.uni-muenchen.de/econ-wp/game/papers/0306/0306004.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpga:0306004

Access Statistics for this paper

More papers in Game Theory and Information from University Library of Munich, Germany
Bibliographic data for series maintained by EconWPA (volker.schallehn@ub.uni-muenchen.de this e-mail address is bad, please contact repec@repec.org).