Constrained interactions and social coordination

Mathias Staudigl and Simon Weidenholzer

Journal of Economic Theory, 2014, vol. 152, issue C, 41-63

Abstract: We consider a co-evolutionary model of social coordination and network formation where agents may decide on an action in a 2×2-coordination game and on whom to establish costly links to. We find that if agents may only support a limited number of links payoff dominant conventions will emerge in the long run, contrasting the case of unconstrained interactions where risk dominant conventions arise for a wide range of parameters. Under constrained iterations, already a small number of agents choosing the payoff dominant action enables agents – by linking up to those agents and choosing the payoff dominant action – to secure themselves the highest possible payoff. We extend our model by discussing constrained interactions in the context of general m×m games, convex payoff functions, heterogeneous constraints, and frictions in link formation.

Keywords: Coordination games; Equilibrium selection; Learning; Network formation (search for similar items in EconPapers)
JEL-codes: C72 D83 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (35)

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Working Paper: Constrained Interactions and Social Coordination (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:152:y:2014:i:c:p:41-63

DOI: 10.1016/j.jet.2014.04.001

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