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Local interactions under switching costs

UNSPECIFIED (2017) Local interactions under switching costs. [UNSPECIFIED]


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© 2016, Springer-Verlag Berlin Heidelberg. 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.

Subjects: H Social Sciences > HB Economic Theory
Divisions: Faculty of Social Sciences > Economics, Department of
Depositing User: Users 161 not found.
Date Deposited: 04 Apr 2014 15:08
Last Modified: 10 Jan 2019 15:21

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