Local farsightedness in network formation

de Callataÿ, Pierre;Mauleon, Ana;Vannetelbosch, Vincent
(2024) International Journal of Economic Theory — Vol. 20, n° 2, p. 199-226 (2024)

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We propose the concept of local‐k farsighted consistent network for analyzing network formation games where players only consider a limited number of feasible networks. A network g is said to be local‐k farsightedly consistent if, for any network g′ within the distance‐k neighborhood of g, either g is not defeated by g′, or g defeats g′. We show that if the utility function is (componentwise) egalitarian or satisfies reversibility or excludes externalities across components, then local‐k farsightedness is more likely to be a good proxy for what would happen when players have full knowledge of all feasible networks.
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de Callataÿ, P., Mauleon, A., & Vannetelbosch, V. (2024). Local farsightedness in network formation. International Journal of Economic Theory, 20(2), 199-226. https://doi.org/10.1111/ijet.12396 (Original work published 2024)