The Complexity of Coordination

The Eastern Economic Journal, Forthcoming

GMU Working Paper in Economics No. 15-65

17 Pages Posted: 25 Jun 2015 Last revised: 2 Jun 2016

See all articles by Davoud Taghawi-Nejad

Davoud Taghawi-Nejad

University of Sao Paulo (USP)

Vipin P. Veetil

Indian Institute of Technology Madras

Date Written: June 1, 2016

Abstract

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

Taghawi-Nejad, Davoud and Veetil, Vipin P., The Complexity of Coordination (June 1, 2016). The Eastern Economic Journal, Forthcoming; GMU Working Paper in Economics No. 15-65. Available at SSRN: https://ssrn.com/abstract=2621852 or http://dx.doi.org/10.2139/ssrn.2621852

Davoud Taghawi-Nejad

University of Sao Paulo (USP) ( email )

Rua Luciano Gualberto, 315
São Paulo, São Paulo 14800-901
Brazil

Vipin P. Veetil (Contact Author)

Indian Institute of Technology Madras

Chennai
India

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