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Lock-in through passive connections

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  • Cui, Zhiwei
  • Weidenholzer, Simon

Abstract

We consider a model of social coordination and network formation where agents decide on an action in a coordination game and on whom to establish costly links to. We study the role of passive connections; these are links that other agents form to a given agent. Such passive connections may create an endogenously arising form of lock-in where agents don't switch actions and links, as this may result in a loss of payoff received through them. When agents are constrained in the number of links they form, the set of Nash equilibria includes action-heterogenous strategy profiles, where different agents choose different actions. Depending on the precise parameters of the model, risk-dominant, payoff-dominant, or action-heterogenous strategy profiles are stochastically stable.

Suggested Citation

  • Cui, Zhiwei & Weidenholzer, Simon, 2021. "Lock-in through passive connections," Journal of Economic Theory, Elsevier, vol. 192(C).
    • Handle: RePEc:eee:jetheo:v:192:y:2021:i:c:s0022053121000041
    DOI: 10.1016/j.jet.2021.105187
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    Citations

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    Cited by:

    1. Lu, Feifei, 2023. "Local information hinders coordination in endogenous networks," Economics Letters, Elsevier, vol. 223(C).
    2. Cui, Zhiwei, 2023. "Linking friction, social coordination and the speed of evolution," Games and Economic Behavior, Elsevier, vol. 140(C), pages 410-430.
    3. Markus Kinateder & Luca Paolo Merlino, 2021. "The Evolution of Networks and Local Public Good Provision: A Potential Approach," Games, MDPI, vol. 12(3), pages 1-12, July.
    4. Cui, Zhiwei & Jiang, Ge & Shi, Fei, 2023. "Size-dependent minimum-effort games and constrained interactions," Economics Letters, Elsevier, vol. 223(C).
    5. Ziwei Wang & Jiabin Wu, 2023. "Partner Choice and Morality: Preference Evolution under Stable Matching," Papers 2304.11504, arXiv.org, revised Oct 2023.
    6. Leonardo Boncinelli & Alessio Muscillo & Paolo Pin, 2022. "Efficiency and Stability in a Process of Teams Formation," Dynamic Games and Applications, Springer, vol. 12(4), pages 1101-1129, December.
    7. Cui, Zhiwei & Shi, Fei, 2022. "Bandwagon effects and constrained network formation," Games and Economic Behavior, Elsevier, vol. 134(C), pages 37-51.

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    More about this item

    Keywords

    Social coordination; Network formation; Learning; Lock-in;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation

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