When are efficient conventions selected in networks?

Carlos Alós-Ferrer, Johannes Buckenmaier and Federica Farolfi

Journal of Economic Dynamics and Control, 2021, vol. 124, issue C

Abstract: We study the determinants of convergence to efficient conventions in coordination games played on networks, when agents focus on past performance (imitative play). Previous theoretical results provide an incomplete picture and suggest potentially-complex interactions between the features of dynamics and behavior. We conducted an extensive simulation study (with approximately 1.12 million simulations) varying network size, interaction and information radius, the probability of actual interaction, the probability of mistakes, tie-breaking rules, and the process governing revision opportunities. Our main result is that “more interactions,” be it in the form of larger interaction neighborhoods or of a higher interaction probability, lead to less coordination on efficient conventions. A second observation, confirming previous but partial theoretical results, is that a large network size relative to the size of neighborhoods (a “large world”) facilitates convergence to efficient conventions. Third, a larger information neighborhood helps efficiency because it increases visibility of efficient payoffs across the network. Last, technical details of the dynamic specification as tie-breaking or inertia, while often relevant for specific theoretical results, appear to be of little empirical relevance in the larger space of dynamics.

Keywords: Agent-based models; Coordination games; Local interactions; Learning; Networks (search for similar items in EconPapers)
JEL-codes: C63 C72 C73 D83 (search for similar items in EconPapers)
Date: 2021
References: Add references at CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:124:y:2021:i:c:s0165188921000099

DOI: 10.1016/j.jedc.2021.104074

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