Contractually Stable Networks

31 Pages Posted: 7 Aug 2009

See all articles by Vincent J. Vannetelbosch

Vincent J. Vannetelbosch

Center for Operations Research and Econometrics (CORE)

Jean-François Caulier

CEREC

Ana Mauleon

Université Saint-Louis - Bruxelles; Catholic University of Louvain (UCL) - Center for Operations Research and Econometrics (CORE)

Date Written: August 4, 2009

Abstract

We develop a theoretical framework that allows us to study which bilateral links and coalition structures are going to emerge at equilibrium. We define the notion of coalitional network to represent a network and a coalition structure, where the network specifies the nature of the relationship each individual has with his coalition members and with individuals outside his coalition. To predict the coalitional networks that are going to emerge at equilibrium we propose the concept of contractual stability which requires that any change made to the coalitional network needs the consent of both the deviating players and their original coalition partners. We show that there always exists a contractually stable coalitional network under the simple majority decision rule and the component-wise egalitarian or majoritarian allocation rules. Moreover, requiring the consent of group members may help to reconcile stability and efficiency.

Keywords: networks, coalition structures, contractual stability, allocation rules

JEL Classification: A14, C7

Suggested Citation

Vannetelbosch, Vincent J. and Caulier, Jean-François and Mauleon Echeverria, Ana Carmen, Contractually Stable Networks (August 4, 2009). FEEM Working Paper No. 47.2009. Available at SSRN: https://ssrn.com/abstract=1443906 or http://dx.doi.org/10.2139/ssrn.1443906

Vincent J. Vannetelbosch (Contact Author)

Center for Operations Research and Econometrics (CORE) ( email )

34 Voie du Roman Pays
1348 Louvain-la-Neuve, 1348
Belgium

Jean-François Caulier

CEREC ( email )

Brussels, 1000
Belgium

Ana Carmen Mauleon Echeverria

Université Saint-Louis - Bruxelles ( email )

Brussels, 1000
Belgium

Catholic University of Louvain (UCL) - Center for Operations Research and Econometrics (CORE) ( email )

34 Voie du Roman Pays
B-1348 Louvain-la-Neuve, b-1348
Belgium

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