@techreport{Goyal2003Network,
abstract = {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 unilaterally investing in costly pair-wise links. In this context, individual efforts to balance the costs and benefits of links are shown to lead to a unique equilibrium interaction architecture. The dynamics of network formation, however, has powerful effects on individual behavior: if costs of forming links are below a certain threshold then players coordinate on the risk-dominant action, while if costs are above this threshold then they coordinate on the efficient action. These findings are robust to a variety of modifications in the link formation process. For example, it may be posited that, in order for a link to materialize, the link proposal must be two-sided (i.e. put forward by both agents); or that, in case of a unilateral proposal, the link may be refused by the other party (if, say, the latter's net payoff is negative); or that a pair of agents can play the game even if connected only through indirect links.},
address = {London},
author = {Sanjeev Goyal and Fernando Vega-Redondo},
copyright = {http://www.econstor.eu/dspace/Nutzungsbedingungen},
keywords = {C7; D6; 330; Networks, Links, Coordination games, Equilibrium selection, Risk dominance, Efficiency; Spieltheorie; Kooperatives Spiel; Netzwerk; Theorie; Koordination; Gleichgewicht},
language = {eng},
number = {481},
publisher = {Queen Mary, Univ. of London, Dep. of Economics},
title = {Network formation and social coordination},
type = {Working Paper, Department of Economics, Queen Mary, University of London},
url = {http://hdl.handle.net/10419/62882},
year = {2003}
}
