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Chen, Shu-Heng
Gostoli, Umberto
Year of Publication: 
Series/Report no.: 
Economics Discussion Papers 2013-20
In this paper, the authors continue the pursuit of the self-coordination mechanism as studied in the El Farol Bar problem. However, in addition to efficiency (the optimal use of the public facility), they are also interested in the distribution of the public resources among all agents. Hence, they introduce a two-dimensional El Farol Bar problem, to be distinguished from the early one-dimensional one, which has efficiency as the only concern. The authors ask whether it is possible to have self-coordinating solutions to the El Farol Bar problem so that the public resources can be optimally used with neither idle capacity nor incurring congestion and, in the meantime, the resources can be well distributed among all agents. They consider this ideal situation an El Farol version of a good society. This paper shows the existence of a positive answer to this inquiry, but it requires two elements, which were largely left out in the conventional literature on the El Farol Bar problem. These elements are social networks and social preferences. The authors first show, through cellular automata, that social networks can contribute to the emergence of a good society. They then show that the addition of some inequity-averse agents can even guarantee the emergence of the good society.
El Farol Bar problem
social preferences
social networks
inequity aversion
cellular automata
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Working Paper

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