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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
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Handle: RePEc:sce:scecf2:98
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  1. M. Kandori & G. Mailath & R. Rob, 1999. "Learning, Mutation and Long Run Equilibria in Games," Levine's Working Paper Archive 500, David K. Levine.
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  4. L. Blume, 2010. "The Statistical Mechanics of Strategic Interaction," Levine's Working Paper Archive 488, David K. Levine.
  5. Alan Kirman, 1997. "The economy as an evolving network," Journal of Evolutionary Economics, Springer, vol. 7(4), pages 339-353.
  6. Dieckmann, Tone, 1999. "The evolution of conventions with mobile players," Journal of Economic Behavior & Organization, Elsevier, vol. 38(1), pages 93-111, January.
  7. Lawrence Blume, 1993. "The Statistical Mechanics of Best-Response Strategy Revision," Game Theory and Information 9307001, EconWPA, revised 26 Jan 1994.
  8. Ellison, Glenn, 1993. "Learning, Local Interaction, and Coordination," Econometrica, Econometric Society, vol. 61(5), pages 1047-71, September.
  9. George A. Akerlof, 1997. "Social Distance and Social Decisions," Econometrica, Econometric Society, vol. 65(5), pages 1005-1028, September.
  10. George Mailath & Larry Samuelson & Avner Shaked, 1994. "Evolution and Endogenous Interactions," Game Theory and Information 9410003, EconWPA.
  11. Economides, Nicholas, 1996. "The economics of networks," International Journal of Industrial Organization, Elsevier, vol. 14(6), pages 673-699, October.
  12. Watts, Alison, 2001. "A Dynamic Model of Network Formation," Games and Economic Behavior, Elsevier, vol. 34(2), pages 331-341, February.
  13. repec:dgr:uvatin:20000093 is not listed on IDEAS
  14. Cowan Robin & Cowan William & Swann Peter, 1998. "Waves in Consumption with Interdependence among Consumers," Research Memorandum 007, Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT).
  15. Richard Arnott & Kenneth Small, 1993. "The Economics Of Traffic Congestion," Boston College Working Papers in Economics 256, Boston College Department of Economics.
  16. 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.
  17. 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.
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