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Coordination, Local Interactions and Endogenous Neighborhood Formation

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Author Info
Giorgio Fagiolo

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Abstract

The paper presents a local interaction model of coordination with spatially-located agents who simultaneously choose stage-game strategies and adaptively learn how to choose their neighbors. We analyze the behavior of the system when network externalities become eventually negative as neighborhood sizes increase. We show that the society can robustly reach in the long-run steady states characterized by high levels of coordination and small average neighborhood sizes. Moreover, we find that: (i) neighborhood adjustment allows for higher coordination than if interaction structures were static; and: (ii) large populations attain higher coordination provided that average initial neighborhood sizes are not too small.

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Paper provided by Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy in its series LEM Papers Series with number 2001/15.

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Date of creation: 26 Dec 2001
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Handle: RePEc:ssa:lemwps:2001/15

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Related research
Keywords: Learning; Coordination; Nearest-Neighbor Interactions; Endogenous Neighborhood Formation.;

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  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. Lawrence Blume, 1993. "The Statistical Mechanics of Best-Response Strategy Revision," Game Theory and Information 9307001, EconWPA, revised 26 Jan 1994. [Downloadable!]
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  3. Ellison, Glenn, 1993. "Learning, Local Interaction, and Coordination," Econometrica, Econometric Society, vol. 61(5), pages 1047-71, September. [Downloadable!] (restricted)
  4. Page, Scott E, 1997. "On Incentives and Updating in Agent Based Models," Computational Economics, Springer, vol. 10(1), pages 67-87, February. [Downloadable!]
  5. Watts, Alison, 2001. "A Dynamic Model of Network Formation," Games and Economic Behavior, Elsevier, vol. 34(2), pages 331-341, February. [Downloadable!] (restricted)
  6. Economides, Nicholas, 1996. "The economics of networks," International Journal of Industrial Organization, Elsevier, vol. 14(6), pages 673-699, October. [Downloadable!] (restricted)
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  7. Goyal, Sanjeev & Janssen, Maarten C. W., 1997. "Non-Exclusive Conventions and Social Coordination," Journal of Economic Theory, Elsevier, vol. 77(1), pages 34-57, November. [Downloadable!] (restricted)
  8. George A. Akerlof, 1997. "Social Distance and Social Decisions," Econometrica, Econometric Society, vol. 65(5), pages 1005-1028, September.
  9. Alan Kirman, 1997. "The economy as an evolving network," Journal of Evolutionary Economics, Springer, vol. 7(4), pages 339-353. [Downloadable!] (restricted)
  10. Edward Droste & Robert P. Gilles & Cathleen Johnson, 2000. "Evolution of Conventions in Endogenous Social Networks," Econometric Society World Congress 2000 Contributed Papers 0594, Econometric Society. [Downloadable!]
  11. Page, Scott E., 1997. "On Incentives and Updating in Agent Based Models," Working Papers 1001, California Institute of Technology, Division of the Humanities and Social Sciences. [Downloadable!]
  12. Cowan,Robin & Cowan,William & Swann,Peter, 1998. "Waves in Consumption with Interdependence among Consumers," Research Memoranda 007, Maastricht : MERIT, Maastricht Economic Research Institute on Innovation and Technology. [Downloadable!]
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  13. Kandori, Michihiro & Mailath, George J & Rob, Rafael, 1993. "Learning, Mutation, and Long Run Equilibria in Games," Econometrica, Econometric Society, vol. 61(1), pages 29-56, January. [Downloadable!] (restricted)
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  14. Blume Lawrence E., 1993. "The Statistical Mechanics of Strategic Interaction," Games and Economic Behavior, Elsevier, vol. 5(3), pages 387-424, July. [Downloadable!] (restricted)
  15. Dieckmann, Tone, 1999. "The evolution of conventions with mobile players," Journal of Economic Behavior & Organization, Elsevier, vol. 38(1), pages 93-111, January. [Downloadable!] (restricted)
  16. George Mailath & Larry Samuelson & Avner Shaked, 1994. "Evolution and Endogenous Interactions," Game Theory and Information 9410003, EconWPA. [Downloadable!]
  17. Young, H Peyton, 1996. "The Economics of Convention," Journal of Economic Perspectives, American Economic Association, vol. 10(2), pages 105-22, Spring. [Downloadable!] (restricted)
  18. Richard Arnott & Kenneth Small, 1993. "The Economics Of Traffic Congestion," Boston College Working Papers in Economics 256, Boston College Department of Economics.
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  1. Chantarat, Sommarat & Barrett, Christopher B., 2007. "Social Network Capital, Economic Mobility and Poverty Traps," MPRA Paper 1947, University Library of Munich, Germany. [Downloadable!]
    Other versions:
  2. Giorgio Fagiolo & Luigi Marengo & Marco Valente, 2003. "Endogenous Networks in Random Population Games," LEM Papers Series 2003/03, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy. [Downloadable!]
    Other versions:
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