Coordination with Constrained Network Formation

e study whether maximum efficiency can be obtained in a stochastic learning model where players can actively form links with a limited number of peers to play a size-dependent minimum-effort game. The long-run equilibrium is contingent on the linking constraint and the marginal payoff from coordination. A restrictive linking constraint or a large marginal payoff from coordinating on the maximum effort promotes efficient coordination. Even if these conditions are not satisfied, players need not to be trapped in the least-efficient convention. With the discretion to choose partners, a large population of potential participants will facilitate the emergence of maximum efficiency