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Coordination in Evolving Networks with Endogenous Decay

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Author Info
Francesco Feri ()
Miguel A.Meléndez-Jiménez
Abstract

This paper studies an evolutionary model of network formation with endogenous decay, in which agents benefit both from direct and indirect connections. In addition to forming (costly) links, agents choose actions for a coordination game that determines the level of decay of each link. We address the issues of coordination (long-run equilibrium selection) and network formation by means of stochastic stability techniques. We find that both the link cost and the trade-off between efficiency and risk-dominance play a crucial role in the long-run behavior of the system.

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Paper provided by Faculty of Economics and Statistics, University of Innsbruck in its series Working Papers with number 2009-19.

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Length: 42
Date of creation: Jul 2009
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Handle: RePEc:inn:wpaper:2009-19

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Related research
Keywords: Coordination; Networks; Risk dominance; stochastic stability;

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Find related papers by JEL classification:
C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation

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  1. Venkatesh Bala & Sanjeev Goyal, 2000. "A Noncooperative Model of Network Formation," Econometrica, Econometric Society, vol. 68(5), pages 1181-1230, September.
  2. Francesco Feri, 2007. "Network Formation With Endogenous Decay," Working Papers 2007-14, Faculty of Economics and Statistics, University of Innsbruck. [Downloadable!]
  3. Feri, Francesco, 2007. "Stochastic stability in networks with decay," Journal of Economic Theory, Elsevier, vol. 135(1), pages 442-457, July. [Downloadable!] (restricted)
  4. Jackson, Matthew O. & Watts, Alison, 2002. "On the formation of interaction networks in social coordination games," Games and Economic Behavior, Elsevier, vol. 41(2), pages 265-291, November. [Downloadable!] (restricted)
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  5. Goyal, Sanjeev & Vega-Redondo, Fernando, 2005. "Network formation and social coordination," Games and Economic Behavior, Elsevier, vol. 50(2), pages 178-207, February. [Downloadable!] (restricted)
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  6. Bloch, Francis & Dutta, Bhaskar, 2009. "Communication networks with endogenous link strength," Games and Economic Behavior, Elsevier, vol. 66(1), pages 39-56, May. [Downloadable!] (restricted)
  7. Deroian, F., 2009. "Endogenous link strength in directed communication networks," Mathematical Social Sciences, Elsevier, vol. 57(1), pages 110-116, January. [Downloadable!] (restricted)
  8. Watts, Alison, 2001. "A Dynamic Model of Network Formation," Games and Economic Behavior, Elsevier, vol. 34(2), pages 331-341, February. [Downloadable!] (restricted)
  9. Young, H Peyton, 1993. "The Evolution of Conventions," Econometrica, Econometric Society, vol. 61(1), pages 57-84, January. [Downloadable!] (restricted)
  10. Bhaskar, V. & Vega-Redondo, Fernando, 2004. "Migration and the evolution of conventions," Journal of Economic Behavior & Organization, Elsevier, vol. 55(3), pages 397-418, November. [Downloadable!] (restricted)
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  11. Jackson, Matthew O. & Wolinsky, Asher, 1996. "A Strategic Model of Social and Economic Networks," Journal of Economic Theory, Elsevier, vol. 71(1), pages 44-74, October. [Downloadable!] (restricted)
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