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Contagion and efficiency

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  • Alós-Ferrer, Carlos
  • Weidenholzer, Simon

Abstract

We consider a population of agents, either finite or countably infinite, located on an arbitrary network. Agents interact directly only with their immediate neighbors, but are able to observe the behavior of (some) other agents beyond their interaction neighborhood, and learn from that behavior by imitating successful actions. If interactions are not "too global" but information is fluid enough, we show that the efficient action is the only one which can spread contagiously to the whole population from an initially small, finite subgroup. This result holds even in the presence of an alternative, -dominant action.

Suggested Citation

  • Alós-Ferrer, Carlos & Weidenholzer, Simon, 2008. "Contagion and efficiency," Journal of Economic Theory, Elsevier, vol. 143(1), pages 251-274, November.
  • Handle: RePEc:eee:jetheo:v:143:y:2008:i:1:p:251-274
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    References listed on IDEAS

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