Coordination in Evolving Networks with Endogenous Decay

Francesco Feri () and Miguel A.Meléndez-Jiménez

Working Papers from Faculty of Economics and Statistics, University of Innsbruck

Abstract: This paper studies an evolutionary model of network formation with endogenous decay, in which agents benefit both from direct and indirect connections. In addition to forming (costly) links, agents choose actions for a coordination game that determines the level of decay of each link. We address the issues of coordination (long-run equilibrium selection) and network formation by means of stochastic stability techniques. We find that both the link cost and the trade-off between efficiency and risk-dominance play a crucial role in the long-run behavior of the system.

Keywords: Coordination; Networks; Risk dominance; stochastic stability (search for similar items in EconPapers)
JEL-codes: C72 C73 D83 D85 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-evo, nep-gth, nep-net, nep-soc and nep-ure
Date: 2009-07
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Persistent link: http://EconPapers.repec.org/RePEc:inn:wpaper:2009-19

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