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

Shu-Heng Chen and Umberto Gostoli

Journal of Economic Interaction and Coordination, 2017, vol. 12, issue 1, No 3, 59-93

Abstract: Abstract In this paper, we 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), we are also interested in the distribution of the public resources among all agents. Hence, we consider variants of the El Farol Bar problem, to be distinguished from many early studies in which efficiency is the only concern. We ask whether self-coordinating solutions can exist in some variants of the El Farol Bar problem so that public resources can be optimally used with neither idle capacity nor congestion being incurred and, in the meantime, the resources can be well distributed among all agents. We 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 the variants involve two elements, which were largely left out in the conventional literature on the El Farol Bar problem. They are social networks and social preferences. We first show, through cellular automata, that social networks can contribute to the emergence of a “good society”. We then show that the addition of some inequity-averse agents can even guarantee the emergence of the “good society”.

Keywords: El Farol Bar problem; Social preferences; Social networks; Inequity aversion; Cellular automata (search for similar items in EconPapers)
Date: 2017
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DOI: 10.1007/s11403-015-0150-z

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