Publications (57)15.12 Total impact
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ABSTRACT: We propose a concept to study the stability of social and economic networks when players are farsighted and allocations are determined endogenously. A set of networks is a von NeumannMorgenstern farsightedly stable set with bargaining if there exists an allocation rule and a bargaining threat such that (i) there is no farsighted improving path from one network inside the set to another network inside the set, (ii) from any network outside the set there is a farsighted improving path to some network inside the set, (iii) the value of each network is allocated among players so that players suffer or benefit equally from being linked to each other compared to the allocation they would obtain at their respective credible bargaining threat. We show that the set of strongly efficient networks is the unique von NeumannMorgenstern farsightedly stable set with bargaining if the allocation rule is anonymous and component efficient and the value function is top convex. Moreover, the componentwise egalitarian allocation rule emerges endogenously.02/2014;  [Show abstract] [Hide abstract]
ABSTRACT: We consider a model of licensing of a nondrastic innovation in which the patent holder (an outside innovator) negotiates either upfront fixed fees or perunit royal ties with two firms producing horizontally differentiated brands and competing à la Cournot. We investigate how licensing schemes (fixed fee or perunit royalty) and the number of licenses sold (exclusive licensing or complete technology diffusion) affect price agreements and delays in reaching an agreement. We show that the patent holder prefers to license by means of upfront fixed fees except if market competition is mild and the innovation size is small. Once there is private information about the relative bargaining power of the parties, the patent holder may prefer licensing by means of perunit royalties even if market competition is strong. Moreover, the delay in reaching an agreement is greater whenever the patent holder chooses to negotiate upfront fixed fees instead of perunit royalties.International Journal of Economic Theory 12/2013; · 0.38 Impact Factor  [Show abstract] [Hide abstract]
ABSTRACT: We study a model in which heterogeneous agents first form a trading network where link formation is costless. Then, a seller and a buyer are randomly selected among the agents to bargain through a chain of intermediaries. We determine both the trading path and the allocation of the surplus among the seller, the buyer and the intermediaries at equilibrium. We show that a trading network is pairwise stable if and only if it is a core periphery network where the core consists of all weak (or impatient) agents who are linked to each other and the periphery consists of all strong (or patient) agents who have a single link towards a weak agent. Once agents do not know the impatience of the other agents, each bilateral bargaining session may involve delay, but not perpetual disagreement, in equilibrium. When an agent chooses another agent on a path from the buyer to the seller to negotiate bilaterally a partial agreement, her choice now depends both on the type of this other agent and on how much time the succeeding agents on the path will need to reach their partial agreements. We provide sufficient conditions such that core periphery networks are pairwise stable in presence of private information.02/2013;  [Show abstract] [Hide abstract]
ABSTRACT: We investigate the role of manipulation in a model of opinion formation where agents have opinions about some common question of interest. Agents repeatedly communicate with their neighbors in the social network, can exert some effort to manipulate the trust of others, and update their opinions taking weighted averages of neighbors’ opinions. The incentives to manipulate are given by the agents’ preferences. We show that manipulation can modify the trust structure and lead to a connected society, and thus, make the society reaching a consensus. Manipulation fosters opinion leadership, but the manipulated agent may even gain influence on the longrun opinions. In sufficiently homophilic societies, manipulation accelerates (slows down) convergence if it decreases (increases) homophily. Finally, we investigate the tension between information aggregation and spread of misinformation. We find that if the ability of the manipulating agent is weak and the agents underselling (overselling) their information gain (lose) overall influence, then manipulation reduces misinformation and agents converge jointly to more accurate opinions about some underlying true state.01/2013;  [Show abstract] [Hide abstract]
ABSTRACT: We consider a model of wage determination with private information in a duopoly. We investigate the effects of unions having relative concerns on the negotiated wage and the strike activity. We show that an increase of unions' relative concerns has an ambiguous effect on the strike activity.Bulletin of Economic Research 06/2012; · 0.19 Impact Factor  [Show abstract] [Hide abstract]
ABSTRACT: Solution concepts in social environments use either a direct or indirect dominance relationship, depending on whether it is assumed that agents are myopic or farsighted. Direct dominance implies indirect dominance, but not the reverse. Hence, the predicted outcomes when assuming myopic (direct) or farsighted (indirect) agents could be very different. In this paper, we characterize dominance invariant roommate problems when preferences are strict. That is, we obtain the conditions on preference profiles such that indirect dominance implies direct dominance in roommate problems and give these an intuitive interpretation. Whenever some of the conditions are not satisfied, it is important to know the kind of agents that are being investigated in order to use the appropriate stability concept. Furthermore, we characterize dominance invariant roommate problems having a nonempty core. Finally, we show that, if the core of a dominance invariant roommate problem is not empty, it contains a unique matching, the dominance invariant stable matching, in which all agents who mutually top rank each other are matched to one another and all other agents remain unmatched.01/2012; 
Article: Connections Among Farsighted Agents
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ABSTRACT: We study the stability of social and economic networks when players are farsighted. In particular, we examine whether the networks formed by farsighted players are different from those formed by myopic players. We adopt the notion of pairwise farsightedly stable sets (Herings, Mauleon, and Vannetelbosch 2009). We first show that under the componentwise egalitarian allocation rule, the set of strongly efficient networks and the set of pairwise (myopically) stable networks that are immune to coalitional deviations are the unique pairwise farsightedly stable set if and only if the value function is top convex. We then investigate in some classical models of social and economic networks whether the pairwise farsightedly stable sets of networks coincide or not with the set of pairwise (myopically) stable networks and the set of strongly efficient networks.Journal of Public Economic Theory 11/2011; 13(6):935  955. · 0.37 Impact Factor  [Show abstract] [Hide abstract]
ABSTRACT: One form of bounded rationality is a breakdown in the commonality of the knowledge that the players are rational. In Rubinstein's twoperson alternatingoffer bargaining game, assuming time preferences with constant discount factors, common knowledge of rationality is necessary for an agreement on a subgame perfect equilibrium (SPE) partition to be reached (if ever). In this note, assuming time preferences with constant costs of delay, we show that common knowledge of rationality is not necessary to reach always an agreement on a SPE partition. This result is robust to a generalisation, time preferences with constant discount factors and costs of delay, if the players are sufficiently patient.International Game Theory Review 11/2011; 01(03n04).  [Show abstract] [Hide abstract]
ABSTRACT: We develop a theoretical framework that allows us to study which bilateral links and coalition structures are going to emerge at equilibrium. We define the notion of coalitional network to represent a network and a coalition structure, where the network specifies the nature of the relationship each individual has with her coalition members and with individuals outside her coalition. To predict the coalitional networks that are going to emerge at equilibrium we propose the concepts of strong stability and of contractual stability. Contractual stability imposes that any change made to the coalitional network needs the consent of both the deviating players and their original coalition partners. Requiring the consent of coalition members under the simple majority or unanimity decision rule may help to reconcile stability and effiency. Moreover, this new framework can provide in sights that one cannot obtain if coalition formation and network formation are tackled separately and independently.Review Economic Design 09/2011; · 0.29 Impact Factor 
Article: Absolutely stable roommate problems
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ABSTRACT: Different solution concepts (core, stable sets, largest consistent set, ...) can be defined using either a direct or an indirect dominance relation. Direct dominance implies indirect dominance, but not the reverse. Hence, the predicted outcomes when assuming myopic (direct) or farsighted (indirect) agents could be very different. In this paper, we characterize absolutely stable roommate problems when preferences are strict. That is, we obtain the conditions on preference profiles such that indirect dominance implies direct dominance in roommate problems. Furthermore, we characterize absolutely stable roommate problems having a nonempty core. Finally, we show that, if the core of an absolutely stable roommate problem is not empty, it contains a unique matching in which all agents who mutually top rank each other are matched to one another and all other agents remain unmatched.07/2011;  [Show abstract] [Hide abstract]
ABSTRACT: Pairwise stability (Jackson and Wolinsky, 1996) is the standard stability concept in network formation. It assumes myopic behavior of the agents in the sense that they do not forecast how others might react to their actions. Assuming that agents are farsighted, related stability concepts have been proposed. We design a simple network formation experiment to test these theories. Our results provide support for farsighted stability and strongly reject the idea of myopic behavior.02/2011;  [Show abstract] [Hide abstract]
ABSTRACT: What is the effect of product market integration on the market equilibrium in the presence of international network externalities in consumption? To address this question, we set up a spatial twocountry model and we find that the economic forces at work may have an ambiguous effect on prices.Economics Bulletin. 11/2008; 12(25):17.  [Show abstract] [Hide abstract]
ABSTRACT: We adopt the notion of von NeumannMorgenstern (vNM) farsightedly stable sets to determine which matchings are possibly stable when agents are farsighted in onetoone matching problems. We provide the characterization of vNM farsightedly stable sets: a set of matchings is a vNM farsightedly stable set if and only if it is a singleton subset of the core. Thus, contrary to the vNM (myopically) stable sets [Ehlers, J. of Econ. Theory 134 (2007), 537547], vNM farsightedly stable sets cannot include matchings that are not in the core. Moreover, we show that our main result is robust to manytoone matching problems with substitutable preferences: a set of matchings is a vNM farsightedly stable set if and only if it is a singleton set and its element is in the strong core.Theoretical Economics. 04/2008; 6(3).  [Show abstract] [Hide abstract]
ABSTRACT: A vast and often confusing economics literature relates competition to investment in innovation. Following Joseph Schumpeter, one view is that monopoly and large scale promote investment in research and development by allowing a firm to capture a larger fraction of its benefits and by providing a more stable platform for a firm to invest in R&D. Others argue that competition promotes innovation by increasing the cost to a firm that fails to innovate. This lecture surveys the literature at a level that is appropriate for an advanced undergraduate or graduate class and attempts to identify primary determinants of investment in R&D. Key issues are the extent of competition in product markets and in R&D, the degree of protection from imitators, and the dynamics of R&D competition. Competition in the product market using existing technologies increases the incentive to invest in R&D for inventions that are protected from imitators (e.g., by strong patent rights). Competition in R&D can speed the arrival of innovations. Without exclusive rights to an innovation, competition in the product market can reduce incentives to invest in R&D by reducing each innovator's payoff. There are many complications. Under some circumstances, a firm with market power has an incentive and ability to preempt rivals, and the dynamics of innovation competition can make it unprofitable for others to catch up to a firm that is ahead in an innovation race.Theoretical Economics 01/2008; · 0.87 Impact Factor  [Show abstract] [Hide abstract]
ABSTRACT: We develop a model of strategic networks in order to analyze how trade unions will affect the stability of R&D networks through which knowledge is transmitted in an oligopolistic industry. Whenever firms settle wages, the partially connected network is likely to emerge in the long run if and only if knowledge spillovers are large enough. However, when unions settle wages, the complete network is the unique stable network. In other words, the stronger the union bargaining power is, the more symmetric stable R&D networks will be. In terms of network efficiency, the partially connected network (when firms settle wages) does not Pareto dominate the complete network (when unions settle wages) and vice versa.Canadian Journal of Economics/Revue Canadienne d`Economique 01/2008; 41(3):971997. · 0.61 Impact Factor 
Article: Contractually Stable Networks
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ABSTRACT: We develop a theoretical framework that allows us to study which bilateral links and coalition structures are going to emerge at equilibrium. We define the notion of coalitional network to represent a network and a coalition structure, where the network specifies the nature of the relationship each individual has with his coalition members and with individuals outside his coalition. To predict the coalitional networks that are going to emerge at equilibrium we propose the concept of contractual stability which requires that any change made to the coalitional network needs the consent of both the deviating players and their original coalition partners. We show that there always exists a contractually stable coalitional network under the simple majority decision rule and the componentwise egalitarian or majoritarian allocation rules. Moreover, requiring the consent of group members may help to reconcile stability and efficiency.International Journal of Games Theory 07/2007; · 0.58 Impact Factor  [Show abstract] [Hide abstract]
ABSTRACT: We reconsider the Goyal and MoragaGonzález (Rand Journal of Economics, Vol. 32 (2001), pp. 686707) model of strategic networks in order to analyse how government policies (e.g. subsidies) will affect the stability and efficiency of networks of R&D collaboration among three firms located in different countries. A conflict between stability and efficiency is likely to occur. When governments cannot subsidize R&D, this conflict will occur if public spillovers are not very small. However, when governments can subsidize R&D, the likelihood of a conflict is considerably reduced. Indeed, a conflict will arise only if public spillovers are very small or quite large. Copyright © 2007 The Authors; Journal compilation © 2007 Blackwell Publishing Ltd and The University of Manchester.Manchester School 02/2007; 75(6):742766. · 0.26 Impact Factor 
Article: Farsightedly stable networks
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ABSTRACT: A set of networks G is pairwise farsightedly stable (i) if all possible farsighted pairwise deviations from any network g[set membership, variant] G to a network outside G are deterred by the threat of ending worse off or equally well off, (ii) if there exists a farsighted improving path from any network outside the set leading to some network in the set, and (iii) if there is no proper subset of G satisfying conditions (i) and (ii). A nonempty pairwise farsightedly stable set always exists. We provide a full characterization of unique pairwise farsightedly stable sets of networks. Contrary to other pairwise concepts, pairwise farsighted stability yields a Pareto dominant network, if it exists, as the unique outcome. Finally, we study the relationship between pairwise farsighted stability and other concepts such as the largest pairwise consistent set and the von NeumannMorgenstern pairwise farsightedly stable set.Games and Economic Behavior 11/2006; 67(2):526541. · 0.83 Impact Factor  [Show abstract] [Hide abstract]
ABSTRACT: Jackson and Watts (J Econ Theory 71: 44–74, 2002) have examined the dynamic formation and stochastic evolution of networks. We provide a refinement of pairwise stability, ppairwise 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 \frac12\frac{1}{2}pairwise stable network exists, it is unique and it coincides with the unique stochastically stable network. To solve the inexistence problem of ppairwise stable networks, we define its setvalued extension with the notion of ppairwise stable set. The \frac12\frac{1}{2}pairwise stable set exists and is unique. Any stochastically stable networks is included in the \frac12\frac{1}{2}pairwise stable set. Thus, any network outside the \frac12\frac{1}{2}pairwise stable set must be considered as a nonrobust network. We also show that the \frac12\frac{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.International Journal of Games Theory 09/2006; 34(3):351369. · 0.58 Impact Factor 
Article: Farsightedly Stable Networks
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ABSTRACT: We show that the length of compulsory education has a causal impact on regional labour mobility. The analysis is based on a quasiexogenous staged Norwegian school reform, and register data on the whole population. Based on the results, we conclude that part of the USEurope difference, as well as the European NorthSouth difference in labour mobility, is likely to be due to differences in levels of education in the respective regions.Maastricht : METEOR, Maastricht Research School of Economics of Technology and Organization, Research Memoranda. 01/2006;
Publication Stats
299  Citations  
15.12  Total Impact Points  
Top Journals
Institutions

1994–2013

Catholic University of Louvain
 • Center for Operations Research and Econometrics
 • Institute for Economic and Social Research
Walloon Region, Belgium


2005

University of Valencia
Valenza, Valencia, Spain


2004

Maastricht University
 Department of Economics
Maestricht, Limburg, Netherlands


1999–2000

Universidad del País Vasco / Euskal Herriko Unibertsitatea
Leioa, Basque Country, Spain


1997

Tilburg University
 CentER for Research in Economics and Business " CentER"
Tilburg, North Brabant, Netherlands
