The computation of pairwise stable networks

Research output: Working paperProfessional

76 Downloads (Pure)

Abstract

One of the most important stability concepts for network formation is pairwise stability. We develop a homotopy algorithm that is effective in computing pairwise stable networks for a generic network formation problem. To do so, we reformulate the concept of pairwise stability as a Nash equilibrium of a non-cooperative game played by the links in the network and adapt the linear tracing procedure for non-cooperative games to the network formation problem. As a by-product of our main result, we obtain that the number of pairwise stable networks is generically odd. We apply the algorithm to the connections model.
Original languageEnglish
PublisherMaastricht University, Graduate School of Business and Economics
Number of pages27
DOIs
Publication statusPublished - 26 Jan 2021

Publication series

SeriesGSBE Research Memoranda
Number004
ISSN2666-8807

Keywords

  • pairwise stable network
  • computation of equilibria
  • tracing procedure

Cite this