In this paper we study the typical dilemma of social coordination between a risk-dominant convention and a payoff-dominant convention. In particular, we consider a model where a population of agents play a coordination game over time, choosing both the action and the network of agents with whom to interact. The main modeling novelties with respect to the existing literature are: (1) Agents come in two distinct types, (2) the interaction with a different type is costly, and (3) an agent’s type is unobservable prior to interaction. We show that when the cost of interacting with a different type is small with respect to the payoff of coordination, the payoff-dominant convention is the only stochastically stable convention; instead, when the cost of interacting with a different type is large, the only stochastically stable conventions are those where all agents of one type play the payoff-dominant action and all agents of the other type play the risk-dominant action.

Social coordination with locally observable types / Bilancini, Ennio; Boncinelli, Leonardo. - In: ECONOMIC THEORY. - ISSN 0938-2259. - 65:4(2018), pp. 975-1009. [10.1007/s00199-017-1047-y]

Social coordination with locally observable types

BILANCINI, Ennio;
2018

Abstract

In this paper we study the typical dilemma of social coordination between a risk-dominant convention and a payoff-dominant convention. In particular, we consider a model where a population of agents play a coordination game over time, choosing both the action and the network of agents with whom to interact. The main modeling novelties with respect to the existing literature are: (1) Agents come in two distinct types, (2) the interaction with a different type is costly, and (3) an agent’s type is unobservable prior to interaction. We show that when the cost of interacting with a different type is small with respect to the payoff of coordination, the payoff-dominant convention is the only stochastically stable convention; instead, when the cost of interacting with a different type is large, the only stochastically stable conventions are those where all agents of one type play the payoff-dominant action and all agents of the other type play the risk-dominant action.
2018
11-apr-2017
65
4
975
1009
Social coordination with locally observable types / Bilancini, Ennio; Boncinelli, Leonardo. - In: ECONOMIC THEORY. - ISSN 0938-2259. - 65:4(2018), pp. 975-1009. [10.1007/s00199-017-1047-y]
Bilancini, Ennio; Boncinelli, Leonardo
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11380/1132572
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