Idiosyncratic preferences in games on networks

Abstract

We consider a fixed network of players endowed with idiosyncratic preferences over actions and involved in interactions of various types. The aim is to investigate the interplay between idiosyncratic preferences and interactional incentives on a network. The earlier literature demonstrated the conflict between players' intrinsic preferences and coordination incentives. This paper shows that such a conflict is also present in contexts in which players do not necessarily aim at coordination with their peers. The introduction of action preferences changes equilibrium outcomes in a non-trivial fashion: some equilibria disappear, while other, qualitatively new ones, appear. We characterize equilibria for a large class of games, including games of strategic complements and strategic substitutes, and outline a subclass with a unique equilibrium in which all players follow their idiosyncratic action preferences. This equilibrium is Pareto optimal and for many games is also a unique efficient profile.