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Coordination in Evolving Networks with Endogenous Decay

  • Francesco Feri


  • Miguel A.Mel?ndez-Jim?nez
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    This paper studies an evolutionary model of network formation with endogenous decay, in which agents benefit both from direct and indirect connections. In addition to forming (costly) links, agents choose actions for a coordination game that determines the level of decay of each link. We address the issues of coordination (long-run equilibrium selection) and network formation by means of stochastic stability techniques. We find that both the link cost and the trade-off between efficiency and risk-dominance play a crucial role in the long-run behavior of the system.

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    Paper provided by Faculty of Economics and Statistics, University of Innsbruck in its series Working Papers with number 2009-19.

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    Length: 42
    Date of creation: Jul 2009
    Date of revision:
    Handle: RePEc:inn:wpaper:2009-19
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    1. 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.
    2. Young, H Peyton, 1993. "The Evolution of Conventions," Econometrica, Econometric Society, vol. 61(1), pages 57-84, January.
    3. George J. Mailath & Larry Samuelson & Avner Shaked, 1997. "Endogenous Interactions," CARESS Working Papres endo-one, University of Pennsylvania Center for Analytic Research and Economics in the Social Sciences.
    4. Frédéric Deroïan, 2006. "Endogenous Link Strength in Directed Communication Networks," Working Papers halshs-00410544, HAL.
    5. Bloch, Francis & Dutta, Bhaskar, 2005. "Communication Networks with Endogenous Link Strength," The Warwick Economics Research Paper Series (TWERPS) 723, University of Warwick, Department of Economics.
    6. Matthew O. Jackson & Alison Watts, 2000. "On the Formation of Interaction Networks in Social Coordination Games," Econometric Society World Congress 2000 Contributed Papers 0778, Econometric Society.
    7. Watts, Alison, 2001. "A Dynamic Model of Network Formation," Games and Economic Behavior, Elsevier, vol. 34(2), pages 331-341, February.
    8. Carlsson, H. & Van Dame, E., 1991. "Equilibrium Selection in Stag Hunt Games," Papers 9170, Tilburg - Center for Economic Research.
    9. Venkatesh Bala & Sanjeev Goyal, 2000. "A Noncooperative Model of Network Formation," Econometrica, Econometric Society, vol. 68(5), pages 1181-1230, September.
    10. Feri, Francesco, 2007. "Stochastic stability in networks with decay," Journal of Economic Theory, Elsevier, vol. 135(1), pages 442-457, July.
    11. Jackson, Matthew O. & Wolinsky, Asher, 1996. "A Strategic Model of Social and Economic Networks," Journal of Economic Theory, Elsevier, vol. 71(1), pages 44-74, October.
    12. Sanjeev Goyal & Fernando Vega-Redondo, 2003. "Network Formation and Social Coordination," Working Papers 481, Queen Mary University of London, School of Economics and Finance.
    13. Francesco Feri, 2007. "Network Formation With Endogenous Decay," Working Papers 2007-14, Faculty of Economics and Statistics, University of Innsbruck.
    14. Bhaskar, V & Vega-Redondo, F, 1996. "Migration and the Evolution of Conventions," UFAE and IAE Working Papers 354.96, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
    15. Dieckmann, Tone, 1999. "The evolution of conventions with mobile players," Journal of Economic Behavior & Organization, Elsevier, vol. 38(1), pages 93-111, January.
    16. Glen Ellison, 2010. "Learning, Local Interaction, and Coordination," Levine's Working Paper Archive 391, David K. Levine.
    17. Hojman, Daniel A. & Szeidl, Adam, 2006. "Endogenous networks, social games, and evolution," Games and Economic Behavior, Elsevier, vol. 55(1), pages 112-130, April.
    18. Hojman, Daniel & Szeidl, Adam, 2006. "Core and Periphery in Endogenous Networks," Working Paper Series rwp06-022, Harvard University, John F. Kennedy School of Government.
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