Pairwise-stability and Nash equilibria in network formation

Antoni Calvó-Armengol, Rahmi Ilkiliç

    Research output: Contribution to journalArticleResearchpeer-review

    33 Citations (Scopus)

    Abstract

    Suppose that individual payoffs depend on the network connecting them. Consider the following simultaneous move game of network formation: players announce independently the links they wish to form, and links are formed only under mutual consent. We provide necessary and sufficient conditions on the network link marginal payoffs such that the set of pairwise stable, pairwise-Nash and proper equilibrium networks coincide, where pairwise stable networks are robust to one-link deviations, while pairwise-Nash networks are robust to one-link creation but multi-link severance. Under these conditions, proper equilibria in pure strategies are fully characterized by one-link deviation checks.
    Original languageEnglish
    Pages (from-to)51-79
    JournalInternational Journal of Game Theory
    Volume38
    Issue number1
    DOIs
    Publication statusPublished - 1 Mar 2009

    Keywords

    • Network formation
    • Pairwise-stability
    • Proper equilibrium

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