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Social coordination with locally observable types

Author

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  • Ennio Bilancini

    (Università degli Studi di Modena e Reggio Emilia)

  • Leonardo Boncinelli

    (Università degli Studi di Firenze)

Abstract

In this paper we study the typical dilemma of social coordination between a risk-dominant convention and a payoff-dominant convention. In particular, we consider a model where a population of agents play a coordination game over time, choosing both the action and the network of agents with whom to interact. The main modeling novelties with respect to the existing literature are: (1) Agents come in two distinct types, (2) the interaction with a different type is costly, and (3) an agent’s type is unobservable prior to interaction. We show that when the cost of interacting with a different type is small with respect to the payoff of coordination, the payoff-dominant convention is the only stochastically stable convention; instead, when the cost of interacting with a different type is large, the only stochastically stable conventions are those where all agents of one type play the payoff-dominant action and all agents of the other type play the risk-dominant action.

Suggested Citation

  • Ennio Bilancini & Leonardo Boncinelli, 2018. "Social coordination with locally observable types," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 65(4), pages 975-1009, June.
  • Handle: RePEc:spr:joecth:v:65:y:2018:i:4:d:10.1007_s00199-017-1047-y
    DOI: 10.1007/s00199-017-1047-y
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    3. Marianna Belloc & Ennio Bilancini & Leonardo Boncinelli & Simone D'Alessandro, 2017. "A Social Heuristics Hypothesis for the Stag Hunt: Fast- and Slow-Thinking Hunters in the Lab," CESifo Working Paper Series 6824, CESifo.
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    More about this item

    Keywords

    Coordination; Conventions; Evolution; Stochastic stability; Learning; Network formation;
    All these keywords.

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation

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