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Follow the Leader: Simulations on a Dynamic Social Network

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Abstract

This paper introduces a process of individual adjustment based on private local experiences and observation that allows for the emergence of a global social structure that is the equilibrium to the static follow-the-leader game of Goldbaum (2013). The setting rewards agents for being early adopters of popular products or trends. From simple, myopic, self-serving adjustment based on historic evidence by individuals emerges the the equilibrium social structure consisting of a single choice leader and a population of followers, which, in the static setting would require an unlikely degree of coordination to produce. Individual actions take place in a social context with individuals linked via one-way paths of observation. The strategy by which an agent chooses among the available options evolves over time. Different adjustment emergent processes contribute towards the understanding of the unfolding of events that generate the equilibrium structure.

Suggested Citation

  • David Goldbaum, 2013. "Follow the Leader: Simulations on a Dynamic Social Network," Working Paper Series 15, Economics Discipline Group, UTS Business School, University of Technology, Sydney.
  • Handle: RePEc:uts:ecowps:15
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    File URL: http://www.uts.edu.au/sites/default/files/edg_wp15.pdf
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    References listed on IDEAS

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    1. William A. Brock & Steven N. Durlauf, 2001. "Discrete Choice with Social Interactions," Review of Economic Studies, Oxford University Press, vol. 68(2), pages 235-260.
    2. W. Brian Arthur, 1994. "Inductive Reasoning, Bounded Rationality and the Bar Problem," Working Papers 94-03-014, Santa Fe Institute.
    3. Colin Camerer & Teck-Hua Ho, 1999. "Experience-weighted Attraction Learning in Normal Form Games," Econometrica, Econometric Society, vol. 67(4), pages 827-874, July.
    4. Arthur, W Brian, 1994. "Inductive Reasoning and Bounded Rationality," American Economic Review, American Economic Association, vol. 84(2), pages 406-411, May.
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    Cited by:

    1. David Goldbaum, 2009. "Follow the Leader: Steady State Analysis of a Dynamic Social Network," Working Paper Series 158, Finance Discipline Group, UTS Business School, University of Technology, Sydney.
    2. repec:eee:aumajo:v:22:y:2014:i:1:p:28-35 is not listed on IDEAS

    More about this item

    Keywords

    Leader; Dynamic Network; Social Interaction; Consumer Choice; Simulation;

    JEL classification:

    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games

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