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Coordination, Local Interactions, and Endogenous Neighborhood Formation

  • Giorgio Fagiolo

The paper presents a local interaction model of coordination with spatially-located agents who simultaneously choose stage-game strategies and adaptively learn how to choose their neighbors. We analyze the behavior of the system when network externalities become eventually negative as neighborhood sizes increase. We show that the society can robustly reach in the long-run steady states characterized by high levels of coordination and small average neighborhood sizes. Moreover, we find that: (i) neighborhood adjustment allows for higher coordination than if interaction structures were static; and: (ii) large populations attain higher coordination provided that average initial neighborhood sizes are not too small.

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Paper provided by Society for Computational Economics in its series Computing in Economics and Finance 2002 with number 98.

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Date of creation: 01 Jul 2002
Date of revision:
Handle: RePEc:sce:scecf2:98
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  1. Alan Kirman, 1997. "The economy as an evolving network," Journal of Evolutionary Economics, Springer, vol. 7(4), pages 339-353.
  2. Ellison, Glenn, 1993. "Learning, Local Interaction, and Coordination," Econometrica, Econometric Society, vol. 61(5), pages 1047-71, September.
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  8. Lawrence Blume, 1993. "The Statistical Mechanics of Best-Response Strategy Revision," Game Theory and Information 9307001, EconWPA, revised 26 Jan 1994.
  9. Edward Droste & Robert P. Gilles & Cathleen Johnson, 2000. "Evolution of Conventions in Endogenous Social Networks," Econometric Society World Congress 2000 Contributed Papers 0594, Econometric Society.
  10. Page, Scott E, 1997. "On Incentives and Updating in Agent Based Models," Computational Economics, Society for Computational Economics, vol. 10(1), pages 67-87, February.
  11. Nicholas Economides, 1997. "The Economics of Networks," Brazilian Electronic Journal of Economics, Department of Economics, Universidade Federal de Pernambuco, vol. 1(0), December.
  12. Robin Cowan & William Cowan & G.M. Peter Swann, 2004. "Waves in consumption with interdependence among consumers," Canadian Journal of Economics, Canadian Economics Association, vol. 37(1), pages 149-177, February.
  13. George A. Akerlof, 1997. "Social Distance and Social Decisions," Econometrica, Econometric Society, vol. 65(5), pages 1005-1028, September.
  14. Richard Arnott & Kenneth Small, 1993. "The Economics Of Traffic Congestion," Boston College Working Papers in Economics 256, Boston College Department of Economics.
  15. Goyal, Sanjeev & Janssen, Maarten C. W., 1997. "Non-Exclusive Conventions and Social Coordination," Journal of Economic Theory, Elsevier, vol. 77(1), pages 34-57, November.
  16. H. Peyton Young, 1996. "The Economics of Convention," Journal of Economic Perspectives, American Economic Association, vol. 10(2), pages 105-122, Spring.
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