The Complexity of Coordination
The Eastern Economic Journal, Forthcoming
17 Pages Posted: 25 Jun 2015 Last revised: 2 Jun 2016
Date Written: June 1, 2016
The traditional mechanism of finding Nash equilibria presumes that economic actors are capable of performing computations which even computers would take far too long to perform. A decentralized and parallel process of interactions between simple economic actors is presented as a more plausible micro-foundation of the concept of Nash equilibria. It is found that agent-interactions on a scale-free network converge to an equilibrium within reasonable time, however no convergence is found on a small-world network, a ring and a random graph. The structure of the relations between economic actors matters. NP computational complexity of Nash equilibria does not diminish its empirical relevance.
Keywords: Nash equilibria, coordination, emergence, agent-based model, complexity, interaction topology, scale-free network, small-world network
JEL Classification: C63, C72, C73, D82
Suggested Citation: Suggested Citation