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Coordination, Local Interactions and Endogenous Neighborhood Formation

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  • Giorgio Fagiolo

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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Bibliographic Info

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

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References

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Cited by:
  1. Lanny Arvan & David Nickerson, 2006. "Private Investment, Public Aid and Endogenous Divergence in the Evolution of Urban Neighborhoods," The Journal of Real Estate Finance and Economics, Springer, vol. 32(1), pages 83-100, February.
  2. Giorgio Fagiolo & Luigi Marengo & Marco Valente, . "Endogenous Networks in Random Population Games," Modeling, Computing, and Mastering Complexity 2003 05, Society for Computational Economics.
  3. Sommarat Chantarat & Christopher Barrett, 2012. "Social network capital, economic mobility and poverty traps," Journal of Economic Inequality, Springer, vol. 10(3), pages 299-342, September.

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