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Decentralization and the Coordination Problem

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Author Info
Joerg Oechssler (Department of Economics, Columbia University)

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Abstract

This paper addresses the relation between the degree of decentralization in a population and the probability of coordinating on an efficient outcome. An evolutionary learning mechanism with a group structure that allows players to "vote with their feet" is introduced. In contrast to most of the recent literature (e.g. Kandori, Mailath and Rob, 1993) in which the risk dominant equilibrium is shown to prevail in the long run, in this paper it is demonstrated that given a general probability distribution over initial states the evolutionary learning process converges almost always to the efficient equilibrium if interaction is decentralized enough. Furthermore, it is shown how the model can be applied to the problem of product standardization.

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Paper provided by EconWPA in its series Game Theory and Information with number 9403004.

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Date of creation: 17 Mar 1994
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Handle: RePEc:wpa:wuwpga:9403004

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Find related papers by JEL classification:
C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
D8 - Microeconomics - - Information, Knowledge, and Uncertainty

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. Joseph Farrell & Garth Saloner, 1985. "Standardization, Compatibility, and Innovation," RAND Journal of Economics, The RAND Corporation, vol. 16(1), pages 70-83, Spring. [Downloadable!] (restricted)
    Other versions:
  2. John C. Harsanyi & Reinhard Selten, 1988. "A General Theory of Equilibrium Selection in Games," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262582384.
  3. Ellison, Glenn, 1993. "Learning, Local Interaction, and Coordination," Econometrica, Econometric Society, vol. 61(5), pages 1047-71, September. [Downloadable!] (restricted)
  4. Canning, D., 1992. "Learning Language Conventions in Common Interest Signaling Games," Discussion Papers 1992_22, Columbia University, Department of Economics.
  5. Nalebuff, B. & Caplin, A., 1992. "Competition Among Institutions," Discussion Papers 1992_36, Columbia University, Department of Economics.
    Other versions:
  6. Joel Sobel, 1993. "Evolutionary Stability and Efficiency," University of California at San Diego, Economics Working Paper Series 93-17, Department of Economics, UC San Diego.
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  7. Joseph Farrell & Garth Saloner, 1985. "Installed Base and Compatibility With Implications for Product Preannouncements," Working papers 385, Massachusetts Institute of Technology (MIT), Department of Economics.
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  8. José Canals & Fernando Vega-Redondo, 1998. "Multi-level evolution in population games," International Journal of Game Theory, Springer, vol. 27(1), pages 21-35. [Downloadable!] (restricted)
  9. Canning, D., 1990. "Social Equilibrium," Papers 150, Cambridge - Risk, Information & Quantity Signals.
  10. Boyer, Robert & Orlean, Andre, 1992. "How Do Conventions Evolve?," Journal of Evolutionary Economics, Springer, vol. 2(3), pages 165-77, October.
  11. Akihiko Matsui, 1989. "Cheap Talk and Cooperation in the Society," Discussion Papers 848, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
  12. Joerg Oechssler, 1993. "Competition among Conventions," Game Theory and Information 9312001, EconWPA, revised 04 Dec 1993. [Downloadable!]
  13. Vega-Redondo Fernando, 1993. "Competition and Culture in an Evolutionary Process of Equilibrium Selection: A Simple Example," Games and Economic Behavior, Elsevier, vol. 5(4), pages 618-631, October. [Downloadable!] (restricted)
  14. 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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  15. repec:att:wimass:199122 is not listed on IDEAS
  16. Noeldecke,Georg & Samuelson,Larry, . "An evolutionary analysis of backward and forward induction," Discussion Paper Serie B 228, University of Bonn, Germany.
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  17. Young, H Peyton, 1993. "The Evolution of Conventions," Econometrica, Econometric Society, vol. 61(1), pages 57-84, January. [Downloadable!] (restricted)
  18. Matsui, Akihiko, 1991. "Cheap-talk and cooperation in a society," Journal of Economic Theory, Elsevier, vol. 54(2), pages 245-258, August. [Downloadable!] (restricted)
  19. Katz, Michael L & Shapiro, Carl, 1985. "Network Externalities, Competition, and Compatibility," American Economic Review, American Economic Association, vol. 75(3), pages 424-40, June. [Downloadable!] (restricted)
  20. Yong Gwan Kim & Joel Sobel, 1992. "An Evolutionary Approach to Pre-Play Communication," University of California at San Diego, Economics Working Paper Series 92-01, Department of Economics, UC San Diego.
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  21. Katz, Michael L & Shapiro, Carl, 1986. "Technology Adoption in the Presence of Network Externalities," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 822-41, August. [Downloadable!] (restricted)
  22. repec:fth:coluec:607 is not listed on IDEAS
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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. S. Goyal & F. Vega-Redondo, 1999. "Learning, network formation and coordination," Econometric Institute Report 177, Erasmus University Rotterdam, Econometric Institute. [Downloadable!]
    Other versions:
  2. Jakub Steiner, 2006. "Coordination of Mobile Labor," ESE Discussion Papers 152, Edinburgh School of Economics, University of Edinburgh. [Downloadable!]
    Other versions:
  3. Thierry Vignolo, 2007. "Imitation and Selective Matching in Reputational Games," Economics Working Papers ECO2007/31, European University Institute. [Downloadable!]
  4. Thierry Vignolo, 2003. "Reputation by imitation: an evolutionary chain-store game with strategic matching," Economics Bulletin, Economics Bulletin, vol. 3(4), pages 1-9. [Downloadable!]
  5. Sanjeev Goyal, 2003. "Learning in Networks: a survey," Economics Discussion Papers 563, University of Essex, Department of Economics. [Downloadable!]
  6. Tone Dieckmann, 1997. "The Evolution of conventions with Mobile Players," Economics, Finance and Accounting Department Working Paper Series n720897, Department of Economics, Finance and Accounting, National University of Ireland - Maynooth. [Downloadable!]
  7. L. Andreozzi, 2005. "Hayek Reads the Literature on the Emergence of Norms," Papers on Economics and Evolution 2005-03, Max Planck Institute of Economics, Evolutionary Economics Group. [Downloadable!]
  8. Salomonsson, Marcus, 2009. "Group Selection: The quest for social preferences," Working Paper Series in Economics and Finance 712, Stockholm School of Economics. [Downloadable!]
  9. Jack Robles, 2008. "Evolution, bargaining, and time preferences," Economic Theory, Springer, vol. 35(1), pages 19-36, April. [Downloadable!] (restricted)
  10. Dinar, Ariel & Kemper, Karin & Blomquist, William & Kururulasuriya, Pradeep, 2006. "The Process and Performance of Decentralization of River Basin Resource Management: A Global Analysis," 2006 Annual meeting, July 23-26, Long Beach, CA 21093, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association). [Downloadable!]
  11. Dinar, Ariel & Kemper, Karin & Blomquist, William & Diez, Michele & Sine, Gisele & Fru, William, 2005. "Decentralization of river basin management : a global analysis," Policy Research Working Paper Series 3637, The World Bank. [Downloadable!]
  12. 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!]
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