Journal
GAMES AND ECONOMIC BEHAVIOR
Volume 57, Issue 2, Pages 347-360Publisher
ACADEMIC PRESS INC ELSEVIER SCIENCE
DOI: 10.1016/j.geb.2005.09.006
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In the literature of psychology and economics it is frequently observed that individuals tend to conform in their behavior to that of similar individuals. A fundamental question is whether the outcome of such conformity can be consistent with self-interest. We propose that this consistency requires the existence of a Nash or approximate Nash equilibrium that induces a partition of the player set into relatively few societies, each consisting of similar individuals playing similar strategies. In this paper we characterize a family of games admitting the existence of such equilibrium. We also introduce the concept of 'crowding types' into our description of players and distinguish between the crowding type of a player-those characteristics of a player that have direct effects on others-and his tastes. With assumptions of 'within crowding type anonymity' and 'linearity of taste-types' we show that the number of societies can be uniformly bounded. (c) 2005 Elsevier Inc. All rights reserved.
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