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Local interactions under switching costs

Jiang, Ge and Weidenholzer, Simon (2017) 'Local interactions under switching costs.' Economic Theory, 64 (3). 571 - 588. ISSN 0938-2259

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Abstract

We study the impact of switching costs on the long-run outcome in 2×2 coordination games played in the circular city model of local interactions. For low levels of switching costs, the predictions are in line with the previous literature and the risk-dominant convention is the unique long-run equilibrium. For intermediate levels of switching costs, the set of long-run equilibria still contain the risk-dominant convention but may also contain conventions that are not risk dominant. The set of long-run equilibria may further be non-monotonic in the level of switching costs, i.e., as switching costs increase the prediction that the risk-dominant convention is the unique long-run equilibrium and the prediction that both conventions are long-run equilibria alternate. Finally, for high levels of switching costs, also non-monomorphic states will be included in the set of long-run equilibria.

Item Type: Article
Uncontrolled Keywords: Switching costs, Local interactions, Learning, Coordination games
Subjects: H Social Sciences > HB Economic Theory
Divisions: Faculty of Social Sciences > Economics, Department of
Depositing User: Jim Jamieson
Date Deposited: 14 Oct 2016 14:50
Last Modified: 30 Jan 2019 10:15
URI: http://repository.essex.ac.uk/id/eprint/17770

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