Template-type: ReDif-Paper 1.0
Author-Name: Herings, P. Jean-Jacques
Author-workplace-name: RS: GSBE Theme Data-Driven Decision-Making, RS: GSBE Theme Conflict & Cooperation, Microeconomics & Public Economics
Author-Name: Zhan, Yang
Title: The computation of pairwise stable networks
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.
Series: GSBE Research Memoranda
Creation-Date: 20210126
Number: 004
File-URL: https://cris.maastrichtuniversity.nl/ws/files/61693240/RM21004.pdf
File-Format: application/pdf
File-Size: 655023
Handle: Repec:unm:umagsb:2021004
DOI: 10.26481/umagsb.2021004