Random utility coordination games on networks

Marcin Pęski ()
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Marcin Pęski: Department of Economics, University of Toronto

Theoretical Economics, Forthcoming

Abstract: Abstract. We study static binary coordination games with random utility played on networks. In equilibrium, each agent chooses an action only if a fraction of her neighbors choosing the same action is higher than an agent-specific i.i.d. threshold. A fuzzy convention x is a profile where (almost) all agents choose the high action if their threshold is smaller than x and the low action otherwise. The random-utility (RU) dominant outcome x^{*} is a maximizer of an integral of the distribution of thresholds. The definition generalizes Harsanyi-Selten's risk dominance to coordination games with random utility. We show that, on each sufficiently large and fine network, there is an equilibrium that is a fuzzy convention x^{*}. On some networks, including a city network, all equilibria are fuzzy conventions x^{*}. Finally, fuzzy conventions x^{*} are the only behavior that is robust to misspecification of the network structure.

Keywords: Random utility; coordination games; networks (search for similar items in EconPapers)
JEL-codes: C7 (search for similar items in EconPapers)
Date: 2024-10-01
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