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"

Abstract: 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)
Pages: pages 41
Date: 2014-12
New Economics Papers: this item is included in nep-cdm, nep-gth, nep-mic, nep-net and nep-soc
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Journal Article: Social coordination with locally observable types (2018)
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