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Choice under Social Influence: Effects of Learning Behaviours on the Collective Dynamics

In: Cognitive Economics: New Trends

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  • Viktoriya Semeshenko
  • Mirta B. Gordon
  • Jean-Pierre Nadal
  • Denis Phan

Abstract

We consider a simple model in which a population of individuals with idiosyncratic willingnessesto pay must choose repeatedly either to buy or not a unit of a single homogeneous good at a givenprice. Utilities of buyers have positive externalities due to social interactions among customers.If the latter are strong enough, the system has multiple Nash equilibria, revealing coordinationproblems. We assume that individuals learn to make their decisions repeatedly. We study theperformances along the learning path as well as at the customers' reached equilibria, for differentlearning schemes based on past earned and/or forgone payoffs. Results are presented as a functionof the price, for weak and strong social interactions. Pure reinforcement learning is shown tohinder convergence to the Nash equilibrium, even when it is unique. For strong social interactions,coordination on the optimal equilibrium through learning is reached only with some of the learningschemes, under restrictive conditions. The issues of the learning rules are shown to depend cruciallyon the values of their parameters, and are sensitive to the agents' initial beliefs.
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Suggested Citation

  • Viktoriya Semeshenko & Mirta B. Gordon & Jean-Pierre Nadal & Denis Phan, 2006. "Choice under Social Influence: Effects of Learning Behaviours on the Collective Dynamics," Contributions to Economic Analysis, in: Cognitive Economics: New Trends, pages 177-203, Emerald Group Publishing Limited.
  • Handle: RePEc:eme:ceazzz:s0573-8555(06)80009-x
    DOI: 10.1016/S0573-8555(06)80009-X
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    Cited by:

    1. Denis Phan, 2006. "Discrete Choices under Social Influence:Generic Properties," Post-Print halshs-00105857, HAL.

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