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Learning by observing


  • Efe Postalci

    () (Department of Economics, Izmir University of Economics)


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.

Suggested Citation

  • Efe Postalci, 2010. "Learning by observing," Working Papers 1007, Izmir University of Economics.
  • Handle: RePEc:izm:wpaper:1007

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    References listed on IDEAS

    1. Venkatesh Bala & Sanjeev Goyal, 1998. "Learning from Neighbours," Review of Economic Studies, Oxford University Press, vol. 65(3), pages 595-621.
    2. 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.
    3. Epstein, Joshua M, 2001. "Learning to Be Thoughtless: Social Norms and Individual Computation," Computational Economics, Springer;Society for Computational Economics, vol. 18(1), pages 9-24, August.
    4. 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.
    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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    More about this item


    Networks; Network formation; Self organization; Stable networks; Nash networks; Participation Games; Learning;

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation

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