Multilayer Economic Networks with Strategic Cooperation

Understanding the implications of unpredictable and disruptive events, such as the 6-day blockage of the Suez Canal or the imposition of sanctions, is important for guiding the most appropriate response. This is particularly true when the potential for cooperative behaviour between smaller groups exists, exploiting the situation for their benefit.

The research presented in this thesis first seeks to analyse the impact of coalitional elements on basic games of network formation. This serves as a proxy for infrastructure creation and maintenance, as well as the formation of voluntary membership groups for mutual benefit. Conditions under which the players find group membership beneficial are found, as well as analysis provided on the impact of these groups on the public good. The research develops a multilayer model of the interaction between multimarket Cournot trade and congested transport and, once analysed, provides time horizon specific strategy optimisation. The developed coalitional elements and Cournot-Transport model are subsequently combined in a model to represent the imposition of sanctions, and the process by which the sanction target may try and circumvent these sanctions with the assistance of uninvolved third-parties. The model is compared to real world historical data in order to demonstrate its applicability, and that of the analysis conducted upon it. Finally, analysis is conducted on this model to capture its implications at different time horizons and under different network structures.

The original contributions in this thesis include the development of a novel approach to the formation and expansion of non-transferable utility coalitions with membership limitations. This allows for development, from the literature, in the understanding of the stability of coalitions of this form and their impact on both social dilemma and network formation games. It also provides new results on optimal responses to disrupted transportation networks in a dynamic network game. The thesis uses these results to characterise the rate of approach to a new equilibrium after disruption, as well as discussing the impact of coalitions on games that include this aspect. A model of the impact of sanctions is subsequently developed. This gives further results on the best responses to sanctions by players in this game, providing results which help to explain the effectiveness or otherwise of sanctions compared to expectations in the real world.