Complex Networks and Local Bayesian Equilibrium

24 Pages Posted: 2 Jul 2015

See all articles by Evan Sadler

Evan Sadler

Columbia University, Graduate School of Arts and Sciences, Department of Economics

Date Written: June 28, 2015

Abstract

Finding a satisfactory way to represent individual decisions presents a challenge for economic models of social networks. I introduce a new solution concept, local Bayesian equilibrium, that allows us to capture strategic effects while gaining some of the tractability of simpler heurisitcs. The central idea is that players think "locally." They adopt simple models of their neighborhoods in the network and are Bayesian within these models. I illustrate the solution concept through several examples, and I explore a deeper relationship between the structure of the broader network and the common prior assumption.

Keywords: Networks, Bounded Rationality, Local Bayesian Equilibrium

Suggested Citation

Sadler, Evan, Complex Networks and Local Bayesian Equilibrium (June 28, 2015). Available at SSRN: https://ssrn.com/abstract=2624866 or http://dx.doi.org/10.2139/ssrn.2624866

Evan Sadler (Contact Author)

Columbia University, Graduate School of Arts and Sciences, Department of Economics ( email )

420 W. 118th Street
New York, NY 10027
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
97
rank
261,462
Abstract Views
370
PlumX Metrics