LEARNING, NETWORK FORMATION AND COORDINATION

Fernando Vega Redondo and Sanjeev Goyal
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Fernando Vega Redondo: Instituto Valenciano de Investigaciones Económicas
Authors registered in the RePEc Author Service: Fernando Vega-Redondo

Working Papers. Serie AD from Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie)

Abstract: In many economic and social contexts, individual players choose their partners and also decide on a mode of behavior in interactions with these partners. This paper develops a simple model to examine the interaction between partner choice and individual behavior in games of coordination. An important ingredient of our approach is the way we model partner choice: we suppose that a player can establish ties with other players by investing in costly pair-wise links. We show that individual efforts to balance the costs and benefits of links sharply restrict the range of stable interaction architectures; equilibrium networks are either complete or have the star architecture. Moreover, the process of network formation has powerful effects on individual behavior: if costs of forming links are low then players coordinate on the risk-dominant action, while if costs of forming links are high then they coordinate on the efficient action.

Keywords: Networks; social learning; equilibrium selection (search for similar items in EconPapers)
Pages: 59 pages
Date: 2001-06
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Citations: View citations in EconPapers (9)

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http://www.ivie.es/downloads/docs/wpasad/wpasad-2001-19.pdf Fisrt version / Primera version, 2001 (application/pdf)

Related works:
Working Paper: Learning, Network Formation and Coordination (2000)
Working Paper: Learning, Network Formation and Coordination (2000)
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Persistent link: https://EconPapers.repec.org/RePEc:ivi:wpasad:2001-19

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