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Unfolding Social Hierarchies

Vega-Redondo, Fernando (2000) 'Unfolding Social Hierarchies.' Journal of Economic Theory, 90 (2). pp. 177-203. ISSN 0022-0531

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Abstract

Consider a large population of finitely-lived agents organized into n different hierarchical levels. Every period, all those placed at each level are randomly matched to play a given symmetric game. Based on the resulting outcome, a ρ-fraction of agents who (within their own level) attain the highest payoffs are promoted upwards. On the other hand, newcomers replacing those who die every period enter at the lowest level and choose irreversibly the strategy to be played for the rest of their life. This choice is made, with some noise, by imitating one of the strategies adopted at the highest level. In this setup, the unique long-run behavior of the system is fully characterized for the whole class of 2×2 coordination games and two alternative variations of the model. The results crucially depend on the key “institutional” parameters ρ and n. In particular, it is shown that inefficient behavior prevails in the long run (even when risk-dominated) if promotion is only mildly selective—high ρ—and the social system is quite hierarchical—large n. In a stylized manner, these parameter conditions may be viewed as reflecting a sort of institutional deficiency that impairs economic performance.

Item Type: Article
Uncontrolled Keywords: social learning; equilibrium selection; social hierarchy; coordination games
Subjects: H Social Sciences > HB Economic Theory
Divisions: Faculty of Social Sciences > Economics, Department of
Depositing User: Jim Jamieson
Date Deposited: 05 Jan 2013 22:40
Last Modified: 05 Jan 2013 22:40
URI: http://repository.essex.ac.uk/id/eprint/4943

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