Pairwise-stability and nash equilibrium in network formation

A. Calvo-Armengol, R. Ilkilic

Research output: Contribution to journalArticleAcademicpeer-review

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
Number of pages29
JournalInternational Journal of Game Theory
Volume38
Issue number1
DOIs
Publication statusPublished - 1 Jan 2009

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