Coordination in the El Farol Bar Problem: The Roleof Social Preferences and Social Networks

Abstract

In this paper, the authors continue the pursuit of the self-coordination mechanism as studied in theEl Farol Bar problem. However, in addition to efficiency (the optimal use of the public facility), theyare also interested in the distribution of the public resources among all agents. Hence, they introducea two-dimensional El Farol Bar problem, to be distinguished from the early one-dimensional one,which has efficiency as the only concern. The authors ask whether it is possible to have self-coordinating solutions to the El Farol Bar problem so that the public resources can be optimallyused with neither idle capacity nor incurring congestion and, in the meantime, the resources can bewell distributed among all agents. They consider this ideal situation an El Farol version of a "goodsociety". This paper shows the existence of a positive answer to this inquiry, but it requires twoelements, which were largely left out in the conventional literature on the El Farol Bar problem.These elements are social networks and social preferences. The authors first show, through cellularautomata, that social networks can contribute to the emergence of a "good society". They then showthat the addition of some inequity-averse agents can even guarantee the emergence of the "goodsociety".JEL B52 C63 C73Keywords El Farol Bar problem; social preferences; social networks; inequity aversion,cellular automataAuthorsShu-Heng Chen, National Chengchi University, Taipei, Taiwan, [email protected] Gostoli, National Chengchi University, Taipei, Taiwan