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Learning by observing

  • Efe Postalci

    ()

    (Department of Economics, Izmir University of Economics)

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    We introduce a network formation model based on the idea that individuals engage in production (or decide to participate in an action) depending on the similar actions of the people they observe in a society. We differentiate from the classical models of participation by letting individuals to choose, non cooperatively, which agents to observe. Observing behavior of others is a costly activity but provides benefits in terms of reduction in cost of production for the observing agent, which we take it as learning. In this non cooperative setting we provide complete characterization of both Nash stable and socially efficient network configurations. We show that every society can admit a stable network. Moreover, typically there will be multiple stable configurations that will be available for a society. While all stable networks will not be efficient we show that every efficient network will be stable.

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    File URL: http://eco.ieu.edu.tr/wp-content/wp1007.pdf
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    Paper provided by Izmir University of Economics in its series Working Papers with number 1007.

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    Length: 18 pages
    Date of creation: Nov 2010
    Date of revision:
    Handle: RePEc:izm:wpaper:1007
    Contact details of provider: Fax: (90) 232 279 2626
    Web page: http://eco.ieu.edu.tr

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    1. Vallée, Thomas & YIldIzoglu, Murat, 2009. "Convergence in the finite Cournot oligopoly with social and individual learning," Journal of Economic Behavior & Organization, Elsevier, vol. 72(2), pages 670-690, November.
    2. Beck, Gunter W. & Wieland, Volker, 2002. "Learning and control in a changing economic environment," Journal of Economic Dynamics and Control, Elsevier, vol. 26(9-10), pages 1359-1377, August.
    3. Epstein, Joshua M, 2001. "Learning to Be Thoughtless: Social Norms and Individual Computation," Computational Economics, Society for Computational Economics, vol. 18(1), pages 9-24, August.
    4. Bala, Venkatesh & Goyal, Sanjeev, 1998. "Learning from Neighbours," Review of Economic Studies, Wiley Blackwell, vol. 65(3), pages 595-621, July.
    5. Hanaki, Nobuyuki & Ishikawa, Ryuichiro & Akiyama, Eizo, 2009. "Learning games," Journal of Economic Dynamics and Control, Elsevier, vol. 33(10), pages 1739-1756, October.
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