Summary
This paper studies the payoff structure of stable cooperation structures in link formation games. Players choose non-cooperatively with whom they want to form a link, and the payoffs are given by the Myerson value of the cooperation structure obtained. We characterize the class of TU-games that ensure the stability of the full cooperation structure, which turns out to be much larger than the class of superadditive TU-games. We then provide an exact characterization of the Moderer and Shapley potential of the link formation game, and establish its equivalence with the potential as defined by Hart and Mas-Colell [13]. We use this result to show that stable but Pareto dominated graphs can emerge under simple best-response dynamics.
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Haeringer, G. (2003). On the Stability of Cooperation Structures. In: Petrosyan, L.A., Yeung, D.W.K. (eds) ICM Millennium Lectures on Games. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-662-05219-8_10
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DOI: https://doi.org/10.1007/978-3-662-05219-8_10
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