Lock-in through passive connections

We consider a model of social coordination and network formation where agents decide on an action in a coordination game and on whom to establish costly links to. We study the role of passive connections; these are links that other agents form to a given agent. Such passive connections may create an endogenously arising form of lock-in where agents don’t switch actions and links, as this may result in a loss of payoff received through them. When agents are constrained in the number of links they form, the set of Nash equilibria includes actionheterogenous strategy profiles, where different agents choose different actions. Depending on the precise parameters of the model, risk-dominant, payoff-dominant, or action-heterogenous strategy profiles are stochastically stable.