|
|
EconStor >
Queen Mary, University of London >
School of Economics and Finance, Queen Mary, University of London >
Working Paper Series, School of Economics and Finance, Queen Mary, University of London >
Please use this identifier to cite or link to this item:
http://hdl.handle.net/10419/62882
|
| | |
| Title: | | Network formation and social coordination  |
| Authors: | | Goyal, Sanjeev Vega-Redondo, Fernando |
| Issue Date: | | 2003 |
| Series/Report no.: | | Working Paper, Department of Economics, Queen Mary, University of London 481 |
| 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. |
| Subjects: | | Networks, Links, Coordination games, Equilibrium selection, Risk dominance, Efficiency |
| JEL: | | C7 D6 |
| Document Type: | | Working Paper |
| Appears in Collections: | | Working Paper Series, School of Economics and Finance, Queen Mary, University of London
|
| Files in This Item:
| |
|
| No. of Downloads:
| |
| last Month |
last 3 Month |
total |
|
|
|
|
|
| |
| | |
Download bibliographical data as:
BibTeX
|
| |
Share on:http://hdl.handle.net/10419/62882
|
Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.
|