Network Formation with Myopic and Farsighted Players

38 Pages Posted: 8 Dec 2018 Last revised: 22 May 2020

See all articles by Chenghong Luo

Chenghong Luo

Catholic University of Louvain (UCL)

Ana Mauleon

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

Vincent Vannetelbosch

Catholic University of Louvain (UCL)

Date Written: June 2, 2018


We adopt the notion of myopic-farsighted stable set to study the stability of networks when myopic and farsighted individuals decide with whom they want to form a link, according to some utility function that weighs the costs and benefits of each connection. A myopic-farsighted stable set is the set of networks satisfying internal and external stability with respect to the notion of myopic-farsighted improving path. We first provide conditions on the utility function that guarantee the existence of a myopic-farsighted stable set and we show that, when the population becomes mixed, the myopic-farsighted stable set refines the set of pairwise stable networks by eliminating some Pareto-dominated networks. In the end, when all players are farsighted, the myopic-farsighted stable set only consists of all strongly efficient networks. We next show that, in the case of a distance-based utility function, a tension between stability and efficiency is likely to arise when the population is homogeneous (either all myopic or all farsighted). But, once the population is mixed, the tension vanishes if there are enough farsighted individuals. In the case of a degree-based utility function, myopic and farsighted individuals may end up segregated with myopic individuals being overconnected and farsighted ones getting the socially optimal payoff.

Keywords: networks; stable sets; myopic and farsighted players; egalitarian utility; positive convex externalities; distance-based utility; degree-based utility.

JEL Classification: A14, C70, D20

Suggested Citation

Luo, Chenghong and Mauleon Echeverria, Ana Carmen and Vannetelbosch, Vincent, Network Formation with Myopic and Farsighted Players (June 2, 2018). Available at SSRN: or

Chenghong Luo

Catholic University of Louvain (UCL) ( email )

Place Montesquieu, 3
Louvain-la-Neuve, 1348

Ana Carmen Mauleon Echeverria

Université Saint-Louis - Bruxelles ( email )

Brussels, 1000

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

Vincent Vannetelbosch (Contact Author)

Catholic University of Louvain (UCL) ( email )

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

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