Coordination in Evolving Networks with Endogenous Decay
AbstractThis 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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Bibliographic InfoPaper provided by Faculty of Economics and Statistics, University of Innsbruck in its series Working Papers with number 2009-19.
Date of creation: Jul 2009
Date of revision:
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Coordination; Networks; Risk dominance; stochastic stability;
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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-07-28 (All new papers)
- NEP-EVO-2009-07-28 (Evolutionary Economics)
- NEP-GTH-2009-07-28 (Game Theory)
- NEP-NET-2009-07-28 (Network Economics)
- NEP-SOC-2009-07-28 (Social Norms & Social Capital)
- NEP-URE-2009-07-28 (Urban & Real Estate Economics)
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