Research Repository

Network Formation and Social Coordination

Goyal, Sanjeev and Vega-Redondo, Fernando (2003) Network Formation and Social Coordination. Working Paper. Queen Mary, University of London, School of Economics and Finance, Working Papers.

Full text not available from this repository.

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.

Item Type: Monograph (Working Paper)
Uncontrolled Keywords: Networks; Links; Coordination games; Equilibrium selection; Risk dominance; Efficiency
Subjects: H Social Sciences > HB Economic Theory
Divisions: Faculty of Social Sciences > Economics, Department of
Depositing User: Jim Jamieson
Date Deposited: 08 Jan 2013 11:46
Last Modified: 08 Jan 2013 11:46
URI: http://repository.essex.ac.uk/id/eprint/4964

Actions (login required)

View Item View Item