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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 Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy in its series LEM Papers Series with number 2001/15.

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Date of creation: 26 Dec 2001
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Handle: RePEc:ssa:lemwps:2001/15
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  1. Lawrence Blume, 1993. "The Statistical Mechanics of Best-Response Strategy Revision," Game Theory and Information 9307001, EconWPA, revised 26 Jan 1994.
  2. Dieckmann, Tone, 1999. "The evolution of conventions with mobile players," Journal of Economic Behavior & Organization, Elsevier, vol. 38(1), pages 93-111, January.
  3. George Mailath & Larry Samuelson & Avner Shaked, 1994. "Evolution and Endogenous Interactions," Game Theory and Information 9410003, EconWPA.
  4. 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.
  5. Glen Ellison, 2010. "Learning, Local Interaction, and Coordination," Levine's Working Paper Archive 391, David K. Levine.
  6. Economides, Nicholas, 1996. "The economics of networks," International Journal of Industrial Organization, Elsevier, vol. 14(6), pages 673-699, October.
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  8. 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.
  9. Alan Kirman, 1997. "The economy as an evolving network," Journal of Evolutionary Economics, Springer, vol. 7(4), pages 339-353.
  10. Watts, Alison, 2001. "A Dynamic Model of Network Formation," Games and Economic Behavior, Elsevier, vol. 34(2), pages 331-341, February.
  11. 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.
  12. Blume Lawrence E., 1993. "The Statistical Mechanics of Strategic Interaction," Games and Economic Behavior, Elsevier, vol. 5(3), pages 387-424, July.
  13. 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.
  14. 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.
  15. Richard Arnott & Kenneth Small, 1993. "The Economics Of Traffic Congestion," Boston College Working Papers in Economics 256, Boston College Department of Economics.
  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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