DP7279 Existence of Pure Strategies Nash Equilibria in Social Interaction Games with Dyadic Externalities

Author(s): Michel Le Breton, Shlomo Weber
Publication Date: April 2009
Keyword(s): conformity effect, dyadic externalities, Nash equilibria, potential games, Social interactions
JEL(s): C72, D85
Programme Areas: Public Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=7279

In this note we introduce a general class of games where the payoff of every player are affected by her intrinsic taste for available strategic choices; intensity of her dyadic social interactions of with others in the peer group; and conformity effect. We show, that if the dyadic social influences are symmetric and the conformity effect is identical for all players, every game in our class admits a Nash equilibrium in pure strategies. Our proof relies on the fact that our game is potential (Rosenthal (1973), Monderer and Shapley (1996)). We also illustrate the universality of our result through a large spectrum of applications in economics, political science and sociology.