Non-exclusive conventions and social coordination

We study the long run outcome when communities with different conventions interact. We introduce the notion of non-exclusive conventions to model the idea that, by incurring some additional costs agents can remain flexible and hence coordinate their activities more successfully. We show that if these costs of flexibility are low (high) and interaction is local then the Pareto-efficient (risk-dominant) convention prevails in both communities. At intermediate cost levels, the conventions coexist. We also show that the importance of relative size of the two communities varies across interaction structures. (C) 1997 Academic Press.