Alison Watts

On the Formation of Interaction Networks in Social Coordination Games

There are many situations where two interacting individuals can benefit from coordinating their actions. We examine the endogenous choice of partners in such social coordination games and the implications for resulting play. We model the interaction pattern as a network where individuals periodically have the discretion to add or sever links to other players. A player chooses whether to add or sever a link based on the (prospective) partners past behavior. With such endogenous interaction patterns we see multiple stochastically stable states of play, including some that involve play of equilibria in the coordination game that are neither efficient nor risk dominant.

Regular ArticleA Dynamic Model of Network Formation

Network structure plays a significant role in determining the outcome of many important economic relationships; therefore it is crucial to know which network configurations will arise. We analyze the process of network formation in a dynamic framework, where self-interested individuals can form and sever links. We determine which network structures the formation process will converge to. This information allows us to determine whether or not the formation process will converge to an efficient network structure.

Non-myopic formation of circle networks

Abstract We examine the dynamic formation of networks by self-interested individuals who can form and sever links. We assume that agents are initially unconnected, that the cost of forming a first link exceeds its benefits, and that indirect links are valuable. We show that if agents are non-myopic then it is possible for a network shaped like a circle to form.

Social games: Matching and the play of finitely repeated games

We examine a new class of games, which we call social games, where players not only choose strategies but also choose with whom they play. A group of players who are dissatisfied with the play of their current partners can join together and play a new equilibrium. This imposes new refinements on equilibrium play, where play depends on the relative populations of players in different roles, among other things. We also examine finite repetitions of games where players may choose to rematch in any period. Some equilibria of fixed-player repeated games cannot be sustained as equilibria in a repeated social game. Conversely, the set of repeated matching (or social) equilibria also includes some plays that are not part of any subgame perfect equilibrium of the corresponding fixed-player repeated games. We explore existence under different equilibrium definitions, as well as the relationship to renegotiation-proof equilibrium. It is possible for repeated matching equilibria to be completely distinct from renegotiation-proof equilibria, and even to be Pareto inefficient.

Uniqueness of equilibrium in cost sharing games

Abstract A group of agents share a common production process transforming a given input into a given output. In a cost sharing game, each agent simultaneously demands an amount of output; the cost of producing this output is then divided by a given cost sharing mechanism. We seek to find the minimum restrictions that must be placed on a cost sharing mechanism in order to generate a unique Nash equilibrium, given that each player’s preferences are convex and bi-normal (meaning both the input and the output are normal goods). Hence, our conditions for uniqueness are both necessary and sufficient, while previous results give sufficient conditions only. Our results are then applied to several popular cost sharing mechanisms.

Formation of segregated and integrated groups

A model of group formation is presented where the number of groups is fixed and a person can only join a group if the groups members approve the persons joining. Agents have either local status preferences (each agent wants to be the highest status agent in his group) or global status preferences (each agent wants to join the highest status group that she can join). For both preference types, conditions are provided which guarantee the existence of a segregated stable partition where similar people are grouped together and conditions are provided which guarantee the existence of an integrated stable partition where dissimilar people are grouped together. Additionally, in a dynamic framework we show that if a new empty group is added to a segregated stable partition, then integration may occur.

The Influence of Social Networks and Homophily on Correct Voting

There is empirical evidence suggesting that a persons family, friends, or social ties influence who a person votes for. Sokhey and McClurg (2012) find that as political disagreement in a persons social network increases, then a person is less likely to vote correctly. We develop a model where voters have different favorite policies and wish to vote correctly for the candidate whos favorite policy is closest to their own. Voters have beliefs about each candidates favorite policy which may or may not be correct. Voters update their beliefs about political candidates based on who their conservative and liberal social ties are supporting. We find that if everyones social network consists only of those most like themselves, then correct voting is almost always stable; thus political agreement in ones social network facilitates correct voting. We also give conditions under which correct voting is stable for networks exhibiting homophily and for networks exhibiting random social interactions.

Two Ways to Auction Off an Uncertain Good

An auction framework is examined where each seller is uncertain about whether or not he will have a good available to sell. A timely example includes the auctioning off of radio spectrum by licensed primary users to unlicensed secondary users. A licensed primary user may not use the spectrum all of the time, but may not know in advance whether or not he will need the spectrum himself and thus whether or not he will have spectrum bandwidth available to rent out. We consider two types of auctions: an ex-post auction which takes place after each seller learns about the availability of the good and an ex-ante auction which takes place before each seller learns about availability. The expected payoffs to buyers, sellers, and to society are then compared. The ex-ante auction can cause buyers to bid on multiple expected units to ensure that they end up with at least one actual unit. Such over purchasing can create a loss to society. Sellers will prefer the ex-post auction since if fewer units are actually available to sell, then they can be sold at a higher price. Whereas in the ex-ante auction all sellers have one expected unit available to sell which results in a lower price. However, if high value buyers are common, then a buyer may prefer the ex-ante auction as it can be easier to win an expected unit than an ex-post actual unit. In contrast, if a buyer has a high valuation and if high value buyers are uncommon, then he may prefer the ex-post auction since he has a strong chance to win an actual unit.

Generalized Second Price Auctions over a Network

We consider the problem of how to apply a generalized second price (GSP) auction to a buyer–seller network. GSP auctions are often used to sell online ads where buyers care about the position or placement of the ad. GSP auctions can also be applied to wireless data transmissions with congestion where buyers care about the speed of data transmission; however, such an auction would take place over a network as a buyer could only purchase from a seller (or cell tower) that he was linked to (or was close to). Two GSP auctions over a network are considered: separate GSP auctions, and integrated GSP auctions with pauses. The efficiency of these auctions is examined with efficiency favoring the integrated auction with pauses.

Product quality and competition: evidence from the broadband industry

ABSTRACT Access to high-quality broadband internet is important in many different respects such as in communication, education, commerce and information acquisition. We investigate the relationship between the number of broadband providers in an area and the quality of broadband service provided where download speed is used as a proxy for quality. We find that increased competition in an area positively affects the access to fast download speeds. This finding is robust to three different top download speeds tested. Additionally, a theoretical model is provided which shows that competition can decrease the profits associated with offering slow speeds; this gives an incentive for providers to offer higher speeds as a way to increase profits.