Partial Bandwagon Effects and Local Interactions

Carlos Alós-Ferrer, University of Konstanz
Simon Weidenholzer, University of Vienna

Abstract

We consider partial bandwagon properties in the context of coordination games to capture the idea of weak network externalities. We then study a local interactions model where agents play a coordination game following a noisy best-reply process. We identify conditions such that Globally Pairwise Risk Dominant strategies are selected. Examples include arbitrary 3 X 3 coordination games and n X n supermodular games. A comparison with the global interactions benchmark shows that the nature of interactions might alter the long-run results themselves, and not only the speed of convergence. We also illustrate that the simultaneous coexistence of conventions is possible for games with at least 5 strategies.