TY - JOUR

T1 - Network Structures and Poverty Traps

AU - Carrera, Edgar J.Sánchez

AU - Gubar, Elena

AU - Oleynik, Andrey F.

PY - 2019/3/15

Y1 - 2019/3/15

N2 - We build an evolutionary network game of economic agents that choose actions of being either a high-profile or a low-profile economic agent. Those economic agents reside in the vertices of an undirected graph or network given by their types, and their strategic interaction is driven by imitative behavior. Then, the share of types of economic agents forms networks described by a mean field formalism which depends on agents’ payoff functions, as well as on the current state of the economic network. We show the fact that, in this context of networks, a neighbor is imitated if her strategy outperformed the focal individual’s in the previous iterations. The main result is that there are three equilibria (each with a non-degenerate basin of attraction), one completely made up of high-profile individuals, one made up of low-profile individuals (i.e., the poverty trap), and a mixture. The main parameters from being in one or the other equilibrium are: (i) the degree of node, (ii) cost of being high-profile, and (iii) initial distribution of types. We conclude with simple numerical examples to show that outcome depends on network structures and on both the education costs, c, and the value of β which is the incentive to choose the high-profile action.

AB - We build an evolutionary network game of economic agents that choose actions of being either a high-profile or a low-profile economic agent. Those economic agents reside in the vertices of an undirected graph or network given by their types, and their strategic interaction is driven by imitative behavior. Then, the share of types of economic agents forms networks described by a mean field formalism which depends on agents’ payoff functions, as well as on the current state of the economic network. We show the fact that, in this context of networks, a neighbor is imitated if her strategy outperformed the focal individual’s in the previous iterations. The main result is that there are three equilibria (each with a non-degenerate basin of attraction), one completely made up of high-profile individuals, one made up of low-profile individuals (i.e., the poverty trap), and a mixture. The main parameters from being in one or the other equilibrium are: (i) the degree of node, (ii) cost of being high-profile, and (iii) initial distribution of types. We conclude with simple numerical examples to show that outcome depends on network structures and on both the education costs, c, and the value of β which is the incentive to choose the high-profile action.

KW - Behavioral economics

KW - Imitation theory

KW - Network games

KW - Population games

KW - Poverty traps

UR - http://www.scopus.com/inward/record.url?scp=85061809600&partnerID=8YFLogxK

U2 - 10.1007/s13235-018-0256-8

DO - 10.1007/s13235-018-0256-8

M3 - Article

AN - SCOPUS:85061809600

VL - 9

SP - 236

EP - 253

JO - Dynamic Games and Applications

JF - Dynamic Games and Applications

SN - 2153-0785

IS - 1

ER -