Limited Farsightedness in Network Formation
(2016) Journal of Economic Behavior & Organization — Vol. 128, p. 97-120 (2016)
Files
rp2741.pdf
Open Access - Adobe PDF
- 2.04 MB
Details
- Authors
- Abstract
- Pairwise stability (Jackson and Wolinsky, 1996) is the standard stability concept in network formation. It is a myopic notion in the sense that it only considers the immediate benefits of the players. A different perspective investigates perfect farsightedness, proposing related stability concepts. We design a simple network formation experiment to test these extreme theories, but find evidence against both of them: both myopically and farsightedly stable networks fail to emerge when they are not immune to limitedly farsighted deviations. The selection among multiple pairwise stable networks (and the performance of farsighted stability) crucially depends on the level of farsightedness needed to sustain them, and not on efficiency or cooperative considerations.
- Affiliations
Citations
Kirchsteiger, G., Mantovani, M., Mauleon, A., & Vannetelbosch, V. (2016). Limited Farsightedness in Network Formation. Journal of Economic Behavior & Organization, 128, 97-120. https://doi.org/10.1016/j.jebo.2016.05.016 (Original work published 2016)