What Matters Most: Information or Interaction? The Importance of Behavioral Rules on Network Effects for Contagion Processes

Virginie Masson and Simon Angus ()

No 2009-35, School of Economics and Public Policy Working Papers from University of Adelaide, School of Economics and Public Policy

Abstract: We consider a finite population of agents and define a contagion process as the dynamics by which an action, which is initially played by only a small subset of agents, is adopted by the entire population. Each agent has a set of neighbors with whom he shares information and a set of partners with whom he plays a game. These two sets may or may not coincide. Each period, agents choose their actions based on what they observe from their neighbors, and get some payoff from playing a game with their partners. We show that contagion of an action that is risk dominant and efficient is obtained through partners when agents imitate-the-best, and through neighbors when agents use a myopic best response.

Pages: 20 pages
Date: 2009
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Persistent link: https://EconPapers.repec.org/RePEc:adl:wpaper:2009-35

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