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Learning, Network Formation and Coordination

Author

Listed:
  • Sanjeev Goyal

    (Erasmus University Rotterdam)

  • Fernando Vega-Redondo

    (Universidad de Alicante)

Abstract
In many economic and social contexts, individuals can undertake a transaction only if they are `linked' or related to each other. We take the view that these links are costly, in the sense that it takes effort and resources to create and maintain them. The link formation decisions of the players define a network of social interaction. We study the incentives of individuals to form links and the effects of this link formation on the nature of social coordination. Our analysis shows that equilibrium networks have simple architectures; they are either complete networks or stars. Moreover, the process of network formation has powerful effects on social coordination. For low costs of forming links all individuals coordinate on the the risk-dominant action, while for high costs of forming links individuals coordinate on the efficient action.

Suggested Citation

  • Sanjeev Goyal & Fernando Vega-Redondo, 2000. "Learning, Network Formation and Coordination," Econometric Society World Congress 2000 Contributed Papers 0113, Econometric Society.
    • Handle: RePEc:ecm:wc2000:0113
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Arenas, Alex & Diaz-Guilera, Albert & Perez, Conrad J. & Vega-Redondo, Fernando, 2002. "Self-organized criticality in evolutionary systems with local interaction," Journal of Economic Dynamics and Control, Elsevier, vol. 26(12), pages 2115-2142, October.
    2. Boris Salazar & Maria del Pilar Castillo, 2003. "Rationality, preferences and irregular war," Colombian Economic Journal, Academia Colombiana de Ciencias Economicas, Colegio Mayor de Nuestra Senora del Rosario, Pontificia Universidad Javeriana, Universidad de Antioquia, Universidad de los Andes, Universidad del Valle, Universidad Externado de Colombia, Universidad Nacional de Colombia, vol. 1(1), pages 15-33, December.
    3. Feri, Francesco, 2007. "Stochastic stability in networks with decay," Journal of Economic Theory, Elsevier, vol. 135(1), pages 442-457, July.
    4. Yannis M. Ioannides, 2005. "Random Graphs and Social Networks: An Economics Perspective," Discussion Papers Series, Department of Economics, Tufts University 0518, Department of Economics, Tufts University.
    5. Giorgio Fagiolo, 2001. "Coordination, Local Interactions and Endogenous Neighborhood Formation," LEM Papers Series 2001/15, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    6. Michael Kosfeld, "undated". "Network Experiments," IEW - Working Papers 152, Institute for Empirical Research in Economics - University of Zurich.
    7. Yann Bramoullé & Dunia López-Pintado & Sanjeev Goyal & Fernando Vega-Redondo, 2004. "Network formation and anti-coordination games," International Journal of Game Theory, Springer;Game Theory Society, vol. 33(1), pages 1-19, January.
    8. Dutta, Bhaskar & Ghosal, Sayantan & Ray, Debraj, 2005. "Farsighted network formation," Journal of Economic Theory, Elsevier, vol. 122(2), pages 143-164, June.
    9. Giorgio Fagiolo & Luigi Marengo & Marco Valente, 2004. "Endogenous Networks In Random Population Games," Mathematical Population Studies, Taylor & Francis Journals, vol. 11(2), pages 121-147.
    10. Francesco Feri, 2005. "Network Formation with Endogenous Decay," Working Papers 2005.35, Fondazione Eni Enrico Mattei.
    11. Matthew O. Jackson, 2002. "The Stability and Efficiency of Economic and Social Networks," Microeconomics 0211011, University Library of Munich, Germany.
    12. Miguel A. Meléndez-Jiménez, 2002. "Network Formation And Coordination: Bargaining The Division Of Link Costs," Working Papers. Serie AD 2002-27, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    13. Hans Haller & Sudipta Sarangi, 2003. "Nash Networks with Heterogeneous Agents," Discussion Papers of DIW Berlin 337, DIW Berlin, German Institute for Economic Research.
    14. Felipe Balmaceda, 2004. "Network Formation and Cooperation," Econometric Society 2004 Latin American Meetings 208, Econometric Society.
    15. Corominas-Bosch, Margarida, 2004. "Bargaining in a network of buyers and sellers," Journal of Economic Theory, Elsevier, vol. 115(1), pages 35-77, March.
    16. Giorgio Fagiolo & Luigi Marengo & Marco Valente, 2005. "Population Learning in a Model with Random Payoff Landscapes and Endogenous Networks," Computational Economics, Springer;Society for Computational Economics, vol. 24(4), pages 383-408, June.

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    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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