Coordination Games with Communication Costs in Network Environments

Abstract

In this paper, we deal with a coordination game in a network where a player can choose both an action of the game and partners for playing the game. In particular, a player interacts with players connecting through a path consisting of multiple links as well as with players directly connecting by a single link. We represent decay or friction of payoffs with distance as communication costs, and examine the effect of the communication cost on behavior of players in the game and network formation. We investigate properties of equilibrium networks by classifying the link cost and the communication cost, and show diversity of the equilibrium networks.