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Learning, Network Formation and Coordination

Sanjeev Goyal and Fernando Vega-Redondo ()
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Fernando Vega-Redondo: Universidad de Alicante, and Universitat Pompeu Fabra, Barcelona

No 00-093/1, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: In many economic and social contexts, individual players choose their partners and also decide ona mode of behavior in interactions with these partners. This paper develops a simple model toexamine 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 aplayer 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 therange of stable interaction architectures; equilibrium networks are either complete or have the stararchitecture. Moreover, the process of network formation has powerful effects on individualbehavior: 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.

Date: 2000-11-10
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https://papers.tinbergen.nl/00093.pdf (application/pdf)

Related works:
Working Paper: LEARNING, NETWORK FORMATION AND COORDINATION (2001) Downloads
Working Paper: Learning, Network Formation and Coordination (2000) Downloads
Working Paper: Learning, Network Formation and Coordination (2000) Downloads
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