Evolution of Conventions in Populations with Local Interaction Structures

Abstract

It is almost common knowledge in modern societies that conventions regulate many important economic and social processes. Nevertheless, this topic has not received adequate attention in the past neither from empirically oriented nor from theoretical economists. It is the main purpose of this paper to analyze this problem using an analytical model of strategy adaptation in populations with a given social structure (network). In most studies on evolutionary strategy adaptation it is assumed that members of a population are randomly matched with each other member of the population. Seemingly, this does not give a realistic scenario of strategy adaptation in most modern societies where members of a population are matched only with members of their reference groups like families, colleagues at work, etc. However, these groups are typically not isolated from each other. They are interrelated by individual connections, which makes the strategy adaptation problem of a single individual in the population a non-trivial strategic decision problem.