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Learning, Network Formation and Coordination

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  • Sanjeev Goyal

    (Erasmus University Rotterdam)

  • Fernando Vega-Redondo

    (Universidad de Alicante)

Abstract

In many economic and social contexts, individuals can undertake a transaction only if they are `linked' or related to each other. We take the view that these links are costly, in the sense that it takes effort and resources to create and maintain them. The link formation decisions of the players define a network of social interaction. We study the incentives of individuals to form links and the effects of this link formation on the nature of social coordination. Our analysis shows that equilibrium networks have simple architectures; they are either complete networks or stars. Moreover, the process of network formation has powerful effects on social coordination. For low costs of forming links all individuals coordinate on the the risk-dominant action, while for high costs of forming links individuals coordinate on the efficient action.

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Bibliographic Info

Paper provided by Econometric Society in its series Econometric Society World Congress 2000 Contributed Papers with number 0113.

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Date of creation: 01 Aug 2000
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Handle: RePEc:ecm:wc2000:0113

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  1. Fernando Vega Redondo & Ventakamaran Bhaskar, 1996. "Migration and the evolution of conventions," Working Papers. Serie AD, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) 1996-23, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  2. Glen Ellison, 2010. "Learning, Local Interaction, and Coordination," Levine's Working Paper Archive 391, David K. Levine.
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Citations

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Cited by:
  1. Giorgio Fagiolo, 2002. "Coordination, Local Interactions, and Endogenous Neighborhood Formation," Computing in Economics and Finance 2002, Society for Computational Economics 98, Society for Computational Economics.
  2. 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.
  3. Felipe Balmaceda, 2004. "Network Formation and Cooperation," Econometric Society 2004 Latin American Meetings, Econometric Society 208, Econometric Society.
  4. 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.
  5. 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.
  6. 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).
  7. Giorgio Fagiolo & Luigi Marengo & Marco Valente, . "Endogenous Networks in Random Population Games," Modeling, Computing, and Mastering Complexity 2003, Society for Computational Economics 05, Society for Computational Economics.
  8. Francesco Feri, 2005. "Network Formation with Endogenous Decay," Working Papers, Fondazione Eni Enrico Mattei 2005.35, Fondazione Eni Enrico Mattei.
  9. Francesco Feri, 2005. "Stochastic Stability in Network with Decay," Working Papers, Fondazione Eni Enrico Mattei 2005.40, Fondazione Eni Enrico Mattei.
  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. Michael Kosfeld, . "Network Experiments," IEW - Working Papers 152, Institute for Empirical Research in Economics - University of Zurich.
  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. Boris Salazar & María del Pilar Castillo, 2003. "Rationality, preferences and irregular war," COLOMBIAN ECONOMIC JOURNAL, UN - RCE - CID.
    • 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.
  14. Matthew O. Jackson, 2002. "The Stability and Efficiency of Economic and Social Networks," Microeconomics, EconWPA 0211011, EconWPA.

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