Stability of Networks under Level-K Farsightedness

Mauleon, Ana;et.al.
(2016) Second Annual NSF Conference on Network Science in Economics — Location: Stanford University, Stanford (USA) (22.April.2016)

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We introduce the concept of a level-K farsighted set to study the influence of the degree of farsightedness on network stability. The concept generalizes existing concepts where all players are either fully myopic or fully farsighted. We show that a level-K farsighted set always exists and that the level-1 farsighted set G1 is always unique. For generic allocation rules, the set G1 always contains a level-K farsighted set for any K: We provide easy to verify conditions for a set of networks to be a level-K farsighted set and we consider the efficiency of networks in level-K farsighted sets. We show the tractability of the concept by applying it to a model of criminal networks.
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Mauleon, A., & et al. (2016). Stability of Networks under Level-K Farsightedness. Second Annual NSF Conference on Network Science in Economics, Stanford University, Stanford (USA). https://hdl.handle.net/2078.5/183679