34: Divergent behavior in markets with idiosyncratic private information
Author(s): David Goldbaum, Economics Discipline Group, University of Technology Sydney, Sydney, Australia
Date of publication: February 2016
Working paper number: 34
Abstract: This paper examines network formation among a connected population with a preference for conformity and leadership. Agents build stable personal relationships to achieve coordinated actions. The network serves as a repository of collective experiences so that cooperation can emerge from simple, myopic, self-serving adaptation to recent events despite the competing impulses of conformity and leadership and despite limiting individuals to only local information. Computational analysis reveals how behavioral tendencies impact network formation and identifies locally stable disequilibrium structures.