Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/73945
Authors: 
Vannetelbosch, Vincent
Tercieux, Olivier
Year of Publication: 
2005
Series/Report no.: 
Nota di Lavoro, Fondazione Eni Enrico Mattei 48.2005
Abstract: 
Jackson and Watts [J. of Econ. Theory 71 (2002), 44-74] have examined the dynamic formation and stochastic evolution of networks. We provide a refinement of pairwise stability, p-pairwise stability, which allows us to characterize the stochastically stable networks without requiring the tree construction and the computation of resistance that may be quite complex. When a 1/2-pairwise stable network exists, it is unique and it coincides with the unique stochastically stable network. To solve the inexistence problem of p-pairwise stable networks, we define its set-valued extension with the notion of p-pairwise stable set. The 1/2-pairwise stable set exists and is unique. Any stochastically stable network is included in the 1/2-pairwise stable set. Thus, any network outside the 1/2-pairwise stable set must be considered as a nonrobust network. We also show that the 1/2-pairwise stable set can contain no pairwise stable network and we provide examples where a set of networks is more stable than a pairwise stable network.
Subjects: 
Network formation
Pairwise stability
Stochastic stability
JEL: 
C70
D20
Document Type: 
Working Paper

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