Coordination on networks with farsighted and myopic agents

Abstract

AbstractWe study a coordination game on a fixed connected network where players have to choose between two projects. Some players are moderate (i.e. they are ex-ante indifferent between both projects) while others are stubborn (i.e. they always choose the same project). Benefits for moderate players are increasing in the number of neighbors who choose the same project. In addition, players are either farsighted or myopic. Farsighted players anticipate the reactions of others while myopic players do not. We show that, when all players are farsighted, full coordination among the moderate players is reached except if there are stubborn players for both projects. When the population is mixed, the set of stable strategy profiles is a refinement of the set of Nash equilibrium strategy profiles. In fact, turning myopic players into farsighted ones eliminates gradually the inefficient Nash equilibria. Finally, we consider a social planner who can improve coordination by means of two policy instruments: adding links to the network (socialization) and/or turning myopic players into farsighted ones (education).