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Agent-Based Modeling of the El Farol Bar Problem

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Author Info

  • Shu-Heng Chen
  • Umberto Gostoli

Abstract

In this paper, we study the self-coordination problem as demonstrated by the well-known El Farol problem (Arthur, 1994), which has later become what is known as the minority game in the econophysics community. While the El Farol problem or the minority game has been studied for almost two decades, existing studies are mostly only concerned with efficiency. The equality issue, however, has been largely neglected. In this paper, we build an agent-based model to study both efficiency and equality and ask whether a decentralized society can ever possibly self-coordinate a result with the highest efficiency while also maintaining the highest degree of equality. Our agent-based model shows the possibility of achieving this social optimum. The two key determinants to make this happen are social preferences and social networks. Hence, not only doe institutions (networks) matter, but individual characteristics (preferences) also matter. The latter are open to human-subject experiments for further examination.

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Bibliographic Info

Paper provided by ASSRU - Algorithmic Social Science Research Unit in its series ASSRU Discussion Papers with number 1120.

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Date of creation: 2011
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Handle: RePEc:trn:utwpas:1120

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Related research

Keywords: El Farol Bar problem; Social Preferences; Social Networks; Self-Organization; Emergence of Coordination.;

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References

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  1. Canan Atilgan & Ali Rana Atilgan & Güven Demirel, 2008. "Collective Behavior Of El Farol Attendees," Advances in Complex Systems (ACS), World Scientific Publishing Co. Pte. Ltd., vol. 11(04), pages 629-639.
  2. Erev, Ido & Roth, Alvin E, 1998. "Predicting How People Play Games: Reinforcement Learning in Experimental Games with Unique, Mixed Strategy Equilibria," American Economic Review, American Economic Association, vol. 88(4), pages 848-81, September.
  3. Eduardo Zambrano, 2004. "The Interplay between Analytics and Computation in the Study of Congestion Externalities: The Case of the El Farol Problem," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 6(2), pages 375-395, 05.
  4. Damien Challet & Matteo Marsili & Gabriele Ottino, 2004. "Shedding light on El Farol," Game Theory and Information 0406002, EconWPA.
  5. Kalinowski, Thomas & Schulz, Hans-Jörg & Briese, Michael, 2000. "Cooperation in the Minority Game with local information," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 277(3), pages 502-508.
  6. Challet, D. & Zhang, Y.-C., 1997. "Emergence of cooperation and organization in an evolutionary game," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 246(3), pages 407-418.
  7. Slanina, František, 2000. "Social organization in the Minority Game model," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 286(1), pages 367-376.
  8. Duncan Whitehead, 2008. "The El Farol Bar Problem Revisited: Reinforcement Learning in a Potential Game," ESE Discussion Papers 186, Edinburgh School of Economics, University of Edinburgh.
  9. Franke, Reiner, 2003. "Reinforcement learning in the El Farol model," Journal of Economic Behavior & Organization, Elsevier, vol. 51(3), pages 367-388, July.
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