Learning by observing
AbstractWe introduce a network formation model based on the idea that individuals engage in production (or decide to participate in an action) depending on the similar actions of the people they observe in a society. We differentiate from the classical models of participation by letting individuals to choose, non cooperatively, which agents to observe. Observing behavior of others is a costly activity but provides benefits in terms of reduction in cost of production for the observing agent, which we take it as learning. In this non cooperative setting we provide complete characterization of both Nash stable and socially efficient network configurations. We show that every society can admit a stable network. Moreover, typically there will be multiple stable configurations that will be available for a society. While all stable networks will not be efficient we show that every efficient network will be stable.
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Bibliographic InfoPaper provided by Izmir University of Economics in its series Working Papers with number 1007.
Length: 18 pages
Date of creation: Nov 2010
Date of revision:
Networks; Network formation; Self organization; Stable networks; Nash networks; Participation Games; Learning;
Find related papers by JEL classification:
- D03 - Microeconomics - - General - - - Behavioral Microeconomics; Underlying Principles
- D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-02-26 (All new papers)
- NEP-NET-2011-02-26 (Network Economics)
- NEP-SOC-2011-02-26 (Social Norms & Social Capital)
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