Farsightedly stable networks |
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| Institution: | 1. Department of Economics, Maastricht University, P.O. Box 616, 6200 MD, Maastricht, The Netherlands;2. FNRS and CEREC, Facultés Universitaires Saint-Louis, Boulevard du Jardin Botanique 43, B-1000 Brussels, Belgium;3. FNRS and CORE, Université Catholique de Louvain, 34 voie du Roman Pays, B-1348 Louvain-la-Neuve, Belgium;1. Universitat Autònoma de Barcelona and Barcelona GSE, Departament d''Economia i d''Història Econòmica, Edifici B, UAB, 08193, Bellaterra (Barcelona), Spain;2. Universidad Nacional de San Luis and CONICET, Instituto de Matemática Aplicada de San Luis, Ejército de los Andes 950, 5700, San Luis, Argentina;1. Institute of Economics Hungarian Academy of Sciences, Hungary;2. Department of Operations Research and Actuarial Sciences, Corvinus University of Budapest, Hungary;1. George L. Argyros School of Business and Economics, Chapman University, United States;2. Economic Science Institute, Chapman University, United States;3. Departamento de Teoria e Historia Economica, Universidad de Granada, Spain;4. Business School, University of Nottingham, UK;1. CEREC, Saint-Louis University–Brussels, Belgium;2. CORE, University of Louvain, Louvain-la-Neuve, Belgium;3. Department of Economic Analysis and ERI-CES, University of Valencia, Valencia, Spain;1. Departamento de Economía, Edificio Amigos, Universidad de Navarra, 31009 Pamplona, Spain;2. University of Antwerp, Prinsstraat 13, 2000 Antwerp, Belgium |
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| Abstract: | A set of networks G is pairwise farsightedly stable (i) if all possible farsighted pairwise deviations from any network g∈ G to a network outside G are deterred by the threat of ending worse off or equally well off, (ii) if there exists a farsighted improving path from any network outside the set leading to some network in the set, and (iii) if there is no proper subset of G satisfying conditions (i) and (ii). A non-empty pairwise farsightedly stable set always exists. We provide a full characterization of unique pairwise farsightedly stable sets of networks. Contrary to other pairwise concepts, pairwise farsighted stability yields a Pareto dominant network, if it exists, as the unique outcome. Finally, we study the relationship between pairwise farsighted stability and other concepts such as the largest pairwise consistent set and the von Neumann–Morgenstern pairwise farsightedly stable set. |
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