Constrained Interactions and Social Coordination

Mathias Staudigl, Simon Weidenholzer*

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

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We consider a co-evolutionary model of social coordination and network formation where agents may decide on an action in a 2 x 2-coordination game and on whom to establish costly links to. We find that if agents may only support a limited number of links payoff dominant conventions will emerge in the long run, contrasting the case of unconstrained interactions where risk dominant conventions arise for a wide range of parameters. Under constrained iterations, already a small number of agents choosing the payoff dominant action enables agents - by linking up to those agents and choosing the payoff dominant action - to secure themselves the highest possible payoff. We extend our model by discussing constrained interactions in the context of general m x m games, convex payoff functions, heterogeneous constraints, and frictions in link formation. (C) 2014 Elsevier Inc. All rights reserved.
Original languageEnglish
JournalJournal of Economic Theory
Publication statusPublished - 2014
Externally publishedYes

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