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Competing conventions

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  • Neary, Philip R.

Abstract

This paper introduces a new coordination problem for a large but finite population – The Language Game. The population is partitioned into two groups of identical agents. Each player shares a common two-action strategy set and interacts pairwise with everyone else. Both symmetric profiles are Pareto-efficient strict equilibria, but the groups rank them differently. The profile where successful coordination occurs only within-group, with each group adopting their most preferred equilibrium action, is also an equilibrium provided the smaller groupʼs preferences are sufficiently strong. In all dynamically stable long-run outcomes, players in the same group adopt the same action. Three properties, that do not matter for equilibrium selection in standard homogeneous agent models, do matter in the Language Game. These are: group size, strength of group preferences, and rates of group adaptiveness (“group dynamism”). A relative increase in group size and group dynamism is always weakly beneficial.

Suggested Citation

  • Neary, Philip R., 2012. "Competing conventions," Games and Economic Behavior, Elsevier, vol. 76(1), pages 301-328.
  • Handle: RePEc:eee:gamebe:v:76:y:2012:i:1:p:301-328
    DOI: 10.1016/j.geb.2012.06.003
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Hedlund, Jonas & Oyarzun, Carlos, 2016. "Imitation in Heterogeneous Populations," Working Papers 0625, University of Heidelberg, Department of Economics.
    2. Ennio Bilancini & Leonardo Boncinelli, 2015. "Social coordination with locally observable types," Department of Economics 0051, University of Modena and Reggio E., Faculty of Economics "Marco Biagi".
    3. Hwang, Sung-Ha & Lim, Wooyoung & Neary, Philip & Newton, Jonathan, 2016. "Conventional Contracts, Intentional behavior and Logit Choice: Equality Without Symmetry," Working Papers 2016-13, University of Sydney, School of Economics.
    4. Goyal, S. & Hernández, P. & Muñnez-Cánovasz, G. & Moisan, F., 2017. "Integration and Segregation," Cambridge Working Papers in Economics 1721, Faculty of Economics, University of Cambridge.
    5. repec:spr:joecth:v:64:y:2017:i:3:d:10.1007_s00199-016-0990-3 is not listed on IDEAS
    6. repec:jmi:articl:jmi-v2i1a5 is not listed on IDEAS
    7. Ennio Bilancini & Leonardo Boncinelli, 2014. "Social coordination with locally observable types," Center for Economic Research (RECent) 108, University of Modena and Reggio E., Dept. of Economics "Marco Biagi".
    8. Lim, Wooyoung & Neary, Philip R., 2016. "An experimental investigation of stochastic adjustment dynamics," Games and Economic Behavior, Elsevier, vol. 100(C), pages 208-219.

    More about this item

    Keywords

    Competing conventions; Stochastic stability; Equilibrium selection;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games

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