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Network Formation And Coordination: Bargaining The Division Of Link Costs

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Author Info
Miguel A. Meléndez-Jiménez (Universidad de Alicante)
Abstract

This paper presents a model of network formation with costly links. We endogenize the amount of cost born by each player involved in a bilateral link by considering that these shares result from bargaining. We analyze this feature in a context of coordination games. We show that, if the cost of the link is not too high, the complete network arises and players coordinate on the same action. If this cost is higher than the risk-dominance premium the efficient action is selected; instead, if it is lower, the risk-dominant action prevails.

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File URL: http://www.ivie.es/downloads/docs/wpasad/wpasad-2002-27.pdf
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File Function: Fisrt version / Primera version, 2002
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Publisher Info
Paper provided by Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) in its series Working Papers. Serie AD with number 2002-27.

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Length: 44 pages
Date of creation: Dec 2002
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Publication status: Published by Ivie
Handle: RePEc:ivi:wpasad:2002-27

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Related research
Keywords: Coordination Nash bargaining solution Markov process

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
C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. S. Goyal & F. Vega-Redondo, 1999. "Learning, network formation and coordination," Econometric Institute Report 177, Erasmus University Rotterdam, Econometric Institute. [Downloadable!]
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  2. Jackson, Matthew O., 1998. "The Evolution of Social and Economic Networks," Working Papers 1044, California Institute of Technology, Division of the Humanities and Social Sciences. [Downloadable!]
    Other versions:
  3. Watts, Alison, 2001. "A Dynamic Model of Network Formation," Games and Economic Behavior, Elsevier, vol. 34(2), pages 331-341, February. [Downloadable!] (restricted)
  4. Young, H Peyton, 1993. "The Evolution of Conventions," Econometrica, Econometric Society, vol. 61(1), pages 57-84, January. [Downloadable!] (restricted)
  5. Martin J. Osborne & Ariel Rubinstein, 2005. "Bargaining and Markets," Levine's Bibliography 666156000000000515, UCLA Department of Economics. [Downloadable!]
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Andrea Galeotti & Miguel Meléndez, 2004. "Exploitation and Cooperation in Networks," Tinbergen Institute Discussion Papers 04-076/1, Tinbergen Institute. [Downloadable!]
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