Farsightedly stable networks

A set of networks G is pairwise farsightedly stable (i) if all possible farsighted pairwise deviations from any network g c 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 C satisfying conditions (i) and (ii). A non-empty 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 Neumann-Morgenstern pairwise farsightedly stable set. (C) 2009 Elsevier Inc. All rights reserved.