On the core of characteristic function games associated with exchange networks

An exchange network is a social system in which the actors gain valued resources from bilateral transactions, but an opportunity to negotiate a deal is given only to those pairs of actors whose positions are tied with each other in a fixed communication network. A transaction consists in a mutually agreed-on division of a resource pool assigned to a network line. An additional constraint imposed on such a network restricts the range of transaction sets which may happen in a single negotiation round to those consistent with a given “exchange regime.” Under the one-exchange regime every actor is permitted to make no more than one deal per round. Bienenstock and Bonacich [Bienenstock, E.J., Bonacich, P., 1992. The core as a solution to exclusionary networks. Social Networks 14, 231–243] proposed to represent a one-exchange network with an n-person game in characteristic function form. The aim of this paper is to develop a mathematical theory of games associated with homogenous one-exchange networks (network homogeneity means that all lines are assigned resource pools of the same size). The focus is on the core, the type of solution considered most important in game theory. In particular, all earlier results obtained by Bonacich are re-examined and there is given a new graph-theoretic necessary and sufficient condition for the existence of nonempty core for the game representing a homogenous one-exchange network. © 2005 Elsevier B.V. All rights reserved.