On the Stability of Hierarchies in Games with Externalities

25 Pages Posted: 16 Apr 2003

See all articles by Sergio Currarini

Sergio Currarini

University of Leicester - Department of Economics; Ca Foscari University of Venice - Dipartimento di Economia

Date Written: March 2003

Abstract

We study the group stability of collective decision making when society is organized according to a non directed graph, and groups' payoff possibilities are given by a partition function. We focus on the stability properties of hierarchical organizations, formally described by minimally connected graphs (or trees). Building on previous works by Greenberg and Weber (1986, 1993) and by Demange (1994, 2001), we restrict the ability of raising objections to proposed payoff imputations to coalitions that are connected in the organization. We show that the stability properties of hierachical organizations, proved in Demange (1994, 2002), extend to partition function games with negative externalities. Under positive externalities, although not ensuring social stability, hierarchies are the "most stable" organizational forms for society.

Suggested Citation

Currarini, Sergio, On the Stability of Hierarchies in Games with Externalities (March 2003). FEEM Working Paper No. 19.2003, Available at SSRN: https://ssrn.com/abstract=389285 or http://dx.doi.org/10.2139/ssrn.389285

Sergio Currarini (Contact Author)

University of Leicester - Department of Economics ( email )

Department of Economics
Leicester LE1 7RH, Leicestershire LE1 7RH
United Kingdom

Ca Foscari University of Venice - Dipartimento di Economia ( email )

Cannaregio 873
Venice, 30121
Italy

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