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Learning, Network Formation and Coordination

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  • Sanjeev Goyal

    ()
    (Erasmus University Rotterdam)

  • Fernando Vega-Redondo

    ()
    (Universidad de Alicante, and Universitat Pompeu Fabra, Barcelona)

Abstract

In many economic and social contexts, individual players choose their partners and also decide ona mode of behavior in interactions with these partners. This paper develops a simple model toexamine the interaction between partner choice and individual behavior in games of coordination.An important ingredient of our approach is the way we model partner choice: we suppose that aplayer can establish ties with other players by investing in costly pair-wise links.We show that individual efforts to balance the costs and benefits of links sharply restrict therange of stable interaction architectures; equilibrium networks are either complete or have the stararchitecture. Moreover, the process of network formation has powerful effects on individualbehavior: if costs of forming links are low then players coordinate on the risk-dominant action,while if costs of forming links are high then they coordinate on the efficient action.

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Bibliographic Info

Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 00-093/1.

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Date of creation: 10 Nov 2000
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Handle: RePEc:dgr:uvatin:20000093

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References

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Citations

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Cited by:
  1. Dunia López-Pintado & Fernando Vega Redondo & Sanjeev Goyal & Yann Bramoulle, 2002. "Network Formation And Anti-Coordination Games," Working Papers. Serie AD, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) 2002-25, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  2. Giorgio Fagiolo, 2001. "Coordination, Local Interactions and Endogenous Neighborhood Formation," LEM Papers Series 2001/15, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
  3. Giorgio Fagiolo & Luigi Marengo & Marco Valente, . "Endogenous Networks in Random Population Games," Modeling, Computing, and Mastering Complexity 2003 05, Society for Computational Economics.
  4. Arenas, Alex & Diaz-Guilera, Albert & Perez, Conrad J. & Vega-Redondo, Fernando, 2002. "Self-organized criticality in evolutionary systems with local interaction," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 26(12), pages 2115-2142, October.
  5. Francesco Feri, 2005. "Stochastic Stability in Network with Decay," Working Papers 2005.40, Fondazione Eni Enrico Mattei.
  6. Matthew O. Jackson, 2002. "The Stability and Efficiency of Economic and Social Networks," Microeconomics, EconWPA 0211011, EconWPA.
  7. Boris Salazar & Maria del Pilar Castillo, 2003. "Rationality, preferences and irregular war," Colombian Economic Journal, Academia Colombiana de Ciencias Economicas, Colegio Mayor de Nuestra Senora del Rosario, Pontificia Universidad Javeriana, Universidad de Antioquia, Universidad de los Andes, Universidad del Valle, Universidad Externado de Colombia, Universidad Nacional de Colombia, vol. 1(1), pages 15-33, December.
  8. Michael Kosfeld, . "Network Experiments," IEW - Working Papers 152, Institute for Empirical Research in Economics - University of Zurich.
  9. Sudipta Sarangi & H. Haller, . "Nash Networks with Heterogeneous Agents," Departmental Working Papers, Department of Economics, Louisiana State University 2003-06, Department of Economics, Louisiana State University.
  10. Miguel A. Meléndez-Jiménez, 2002. "Network Formation And Coordination: Bargaining The Division Of Link Costs," Working Papers. Serie AD, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) 2002-27, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  11. Felipe Balmaceda, 2004. "Network Formation and Cooperation," Econometric Society 2004 Latin American Meetings, Econometric Society 208, Econometric Society.
  12. Giorgio Fagiolo & Luigi Marengo & Marco Valente, 2005. "Population Learning in a Model with Random Payoff Landscapes and Endogenous Networks," Computational Economics, Society for Computational Economics, Society for Computational Economics, vol. 24(4), pages 383-408, June.
  13. Yannis M. Ioannides, 2005. "Random Graphs and Social Networks: An Economics Perspective," Discussion Papers Series, Department of Economics, Tufts University, Department of Economics, Tufts University 0518, Department of Economics, Tufts University.
  14. Francesco Feri, 2005. "Network Formation with Endogenous Decay," Working Papers 2005.35, Fondazione Eni Enrico Mattei.

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