Network formation under mutual consent and costly communication

We consider four different game-theoretic approaches to describe the formation of social networks under mutual consent and costly communication. First, we consider Jackson-Wolinsky’s link-based concept of pairwise stability. Next, we introduce a node-based version of Jackson-Wolinsky’s concept, denoted as strict pairwise stability. Third, we consider the Nash equilibria of Myerson’s consent game. Finally, within the context of Myerson’s consent game, we consider self-confirming equilibria based on simple myopic belief systems requiring minimal information about payoffs, denoted as monadically stable networks. We provide an exhaustive comparison of the classes of the equilibrium networks that result from each of these four approaches. First, we determine the conditions under which there is equivalence of pairwise stability and strict pairwise stability. Second, we show that the Nash equilibria of Myerson’s consent game form a super set of the class of pairwise stable netwo...

• Type: Journal
• Year: 2010
• Where: MSS
• Authors: Robert P. Gilles, Sudipta Sarangi
• Keywords: Hardware, MSS 2010, Nash Equilibria, Pairwise Stability, Strict Pairwise Stability