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A Bargaining Approach To Coordination In Networks

Author

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  • Miguel A. Meléndez-Jiménez

    (Universidad de Alicante)

Abstract

This paper presents a model in which players interact via the formation of costly links and the benefits of bilateral interactions are determined by a coordination game. A novel contribution of this paper is that the fraction of the cost borne by each player involved in a bilateral link is not fixed exogenously, but results from bargaining. We analyze the model both in a static and a dynamic setting. Whereas the static game has multiplicity of equilibria, we show that only one is stochastically stable.

Suggested Citation

  • Miguel A. Meléndez-Jiménez, 2007. "A Bargaining Approach To Coordination In Networks," Working Papers. Serie AD 2007-28, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    • Handle: RePEc:ivi:wpasad:2007-28
    as

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    File URL: http://www.ivie.es/downloads/docs/wpasad/wpasad-2007-28.pdf
    File Function: Fisrt version / Primera version, 2007
    Download Restriction: no
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    References listed on IDEAS

    as
    1. John C. Harsanyi & Reinhard Selten, 1988. "A General Theory of Equilibrium Selection in Games," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262582384, April.
    2. Ellison, Glenn, 1993. "Learning, Local Interaction, and Coordination," Econometrica, Econometric Society, vol. 61(5), pages 1047-1071, September.
    3. Yann Bramoullé & Dunia López-Pintado & Sanjeev Goyal & Fernando Vega-Redondo, 2004. "Network formation and anti-coordination games," International Journal of Game Theory, Springer;Game Theory Society, vol. 33(1), pages 1-19, January.
    4. Ken Binmore & Ariel Rubinstein & Asher Wolinsky, 1986. "The Nash Bargaining Solution in Economic Modelling," RAND Journal of Economics, The RAND Corporation, vol. 17(2), pages 176-188, Summer.
    5. Matthew Haag & Roger Lagunoff, 2006. "Social Norms, Local Interaction, And Neighborhood Planning ," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 47(1), pages 265-296, February.
    6. Demange,Gabrielle & Wooders,Myrna (ed.), 2005. "Group Formation in Economics," Cambridge Books, Cambridge University Press, number 9780521842716, September.
    7. Edward Droste & Robert P. Gilles & Cathleen Johnson, 2000. "Evolution of Conventions in Endogenous Social Networks," Econometric Society World Congress 2000 Contributed Papers 0594, Econometric Society.
    8. Kandori, Michihiro & Mailath, George J & Rob, Rafael, 1993. "Learning, Mutation, and Long Run Equilibria in Games," Econometrica, Econometric Society, vol. 61(1), pages 29-56, January.
    9. Galeotti, Andrea & Goyal, Sanjeev & Kamphorst, Jurjen, 2006. "Network formation with heterogeneous players," Games and Economic Behavior, Elsevier, vol. 54(2), pages 353-372, February.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Olaizola Ortega, María Norma & Valenciano Llovera, Federico, 2015. "The impact of liberalizing cost-saharing on basic models of network formation," IKERLANAK info:eu-repo/grantAgreeme, Universidad del País Vasco - Departamento de Fundamentos del Análisis Económico I.

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    More about this item

    Keywords

    Coordination; Nash bargaining solution; Risk-dominance; Stochastic stability;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory

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