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Coordination in the El Farol Bar problem: The role of social preferences and social networks

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  • Chen, Shu-Heng
  • Gostoli, Umberto

Abstract

In this paper, the authors continue the pursuit of the self-coordination mechanism as studied in the El Farol Bar problem. However, in addition to efficiency (the optimal use of the public facility), they are also interested in the distribution of the public resources among all agents. Hence, they introduce a two-dimensional El Farol Bar problem, to be distinguished from the early one-dimensional one, which has efficiency as the only concern. The authors ask whether it is possible to have self-coordinating solutions to the El Farol Bar problem so that the public resources can be optimally used with neither idle capacity nor incurring congestion and, in the meantime, the resources can be well distributed among all agents. They consider this ideal situation an El Farol version of a good society. This paper shows the existence of a positive answer to this inquiry, but it requires two elements, which were largely left out in the conventional literature on the El Farol Bar problem. These elements are social networks and social preferences. The authors first show, through cellular automata, that social networks can contribute to the emergence of a good society. They then show that the addition of some inequity-averse agents can even guarantee the emergence of the good society.

Suggested Citation

  • Chen, Shu-Heng & Gostoli, Umberto, 2013. "Coordination in the El Farol Bar problem: The role of social preferences and social networks," Economics Discussion Papers 2013-20, Kiel Institute for the World Economy (IfW).
  • Handle: RePEc:zbw:ifwedp:201320
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    References listed on IDEAS

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    Cited by:

    1. Iván Arribas & Amparo Urbano Salvador, 2014. "Local coordination and global congestion in random networks," Discussion Papers in Economic Behaviour 0814, University of Valencia, ERI-CES.
    2. Zhang, Wei & Sun, Yuxin & Feng, Xu & Xiong, Xiong, 2015. "Evolutionary Minority Game with searching behavior," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 436(C), pages 694-706.

    More about this item

    Keywords

    El Farol Bar problem; social preferences; social networks; inequity aversion; cellular automata;

    JEL classification:

    • B52 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Historical; Institutional; Evolutionary
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games

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