Learning by observing

Efe Postalci ()
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Efe Postalci: Department of Economics, Izmir University of Economics

No 1007, Working Papers from Izmir University of Economics

Abstract: We introduce a network formation model based on the idea that individuals engage in production (or decide to participate in an action) depending on the similar actions of the people they observe in a society. We differentiate from the classical models of participation by letting individuals to choose, non cooperatively, which agents to observe. Observing behavior of others is a costly activity but provides benefits in terms of reduction in cost of production for the observing agent, which we take it as learning. In this non cooperative setting we provide complete characterization of both Nash stable and socially efficient network configurations. We show that every society can admit a stable network. Moreover, typically there will be multiple stable configurations that will be available for a society. While all stable networks will not be efficient we show that every efficient network will be stable.

Keywords: Networks; Network formation, Self organization, Stable networks, Nash networks, Participation Games, Learning (search for similar items in EconPapers)
JEL-codes: D03 D85 (search for similar items in EconPapers)
Pages: 18 pages
Date: 2010-11
New Economics Papers: this item is included in nep-net and nep-soc
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Persistent link: https://EconPapers.repec.org/RePEc:izm:wpaper:1007

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