Lock-in through passive connections

Zhiwei Cui and Simon Weidenholzer

Journal of Economic Theory, 2021, vol. 192, issue C

Abstract: We consider a model of social coordination and network formation where agents decide on an action in a coordination game and on whom to establish costly links to. We study the role of passive connections; these are links that other agents form to a given agent. Such passive connections may create an endogenously arising form of lock-in where agents don't switch actions and links, as this may result in a loss of payoff received through them. When agents are constrained in the number of links they form, the set of Nash equilibria includes action-heterogenous strategy profiles, where different agents choose different actions. Depending on the precise parameters of the model, risk-dominant, payoff-dominant, or action-heterogenous strategy profiles are stochastically stable.

Keywords: Social coordination; Network formation; Learning; Lock-in (search for similar items in EconPapers)
JEL-codes: C72 D83 D85 (search for similar items in EconPapers)
Date: 2021
References: Add references at CitEc
Citations: View citations in EconPapers (9)

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Working Paper: Lock-in through passive connections (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:192:y:2021:i:c:s0022053121000041

DOI: 10.1016/j.jet.2021.105187

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