Two-stage network games

Abstract

In the paper, two-stage network games are studied. At the first stage of the game, the players form a network, while at the second stage they choose strategies according to the network realized at the first stage. Both noncooperative and cooperative settings are considered. In the noncooperative case, the Nash equilibrium is used as a solution concept, whereas the cooperative setting involves an allocation (the Shapley value) as a solution concept. It is demonstrated that the Shapley value does not satisfy the time consistency property.