Social coordination with locally observable types
Ennio Bilancini and
Leonardo Boncinelli ()
Center for Economic Research (RECent) from University of Modena and Reggio E., Dept. of Economics "Marco Biagi"
In this paper we study the typical dilemma of social coordination between a risk- dominant convention and a payoff-dominant convention. In particular, we consider a model where a population of agents play a coordination game over time, choosing both the action and the network of agents with whom to interact. The main novelty with respect to the existing literature is that: (i) agents come in two distinct types, (ii) the interaction with a di.erent type is costly, and (iii) an agent's type is unobservable prior to interaction. We show that when the cost of interacting with a different type is small with respect to the payo. of coordination, then the payoff-dominant convention is the only stochastically stable convention; instead, when the cost of interacting with a different type is large, the only stochastically stable conventions are those where all agents of one type play the payoff-dominant action and all agents of the other type play the risk-dominant action.
Keywords: coordination; equilibrium selection; stochastic stability; learning; network formation (search for similar items in EconPapers)
JEL-codes: C73 D83 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cdm, nep-gth, nep-mic, nep-net and nep-soc
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Journal Article: Social coordination with locally observable types (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:mod:recent:108
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