Experimental games on networks: Underpinnings of behavior and equilibrium selection

Date: 2014-04
By: Gary Charness
Francesco Feri
Miguel A. Meléndez-Jiménez
Matthias Sutter
URL: http://d.repec.org/n?u=RePEc:inn:wpaper:2014-14&r=net
In this paper, we describe a series of laboratory experiments that implement specific examples of a more general network structure and we examine equilibrium selection. Specifically, actions are either strategic substitutes or strategic complements, and participants have either complete or incomplete information about the structure of a random network. Since economic environments typically have a considerable degree of complementarity or substitutability, this framework applies to a wide variety of settings. The degree of equilibrium play is striking, in particular with incomplete information. Behavior closely resembles the theoretical equilibrium whenever this is unique; when there are multiple equilibria, general features of networks, such as connectivity, clustering, and the degree of the players, help to predict informed behavior in the lab. People appear to be strongly attracted to maximizing aggregate payoffs (social efficiency), but there are forces that moderate this attraction: 1) people seem content with (in the aggregate) capturing only the lion’s share of the efficient profits in exchange for reduced exposure to loss, and 2) uncertainty about the network structure makes it considerably more difficult to coordinate on a demanding, but efficient, equilibrium that is typically implemented with complete information.
Keywords: Random networks, Incomplete information, Connectivity, Clustering, Strategic substitutes, Strategic complements, Experiment
JEL: C71 C91 D03 D85
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Experimental Games on Networks: Underpinnings of Behavior and Equilibrium Selection

Date: 2014-04
By: Charness, Gary (University of California, Santa Barbara)
Feri, Francesco (University of Innsbruck)
Meléndez-Jiménez, Miguel A. (University of Malaga)
Sutter, Matthias (European University Institute)
URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp8104&r=net
In this paper, we describe a series of laboratory experiments that implement specific examples of a more general network structure and we examine equilibrium selection. Specifically, actions are either strategic substitutes or strategic complements, and participants have either complete or incomplete information about the structure of a random network. Since economic environments typically have a considerable degree of complementarity or substitutability, this framework applies to a wide variety of settings. The degree of equilibrium play is striking, in particular with incomplete information. Behavior closely resembles the theoretical equilibrium whenever this is unique; when there are multiple equilibria, general features of networks, such as connectivity, clustering, and the degree of the players, help to predict informed behavior in the lab. People appear to be strongly attracted to maximizing aggregate payoffs (social efficiency), but there are forces that moderate this attraction: 1) people seem content with (in the aggregate) capturing only the lion’s share of the efficient profits in exchange for reduced exposure to loss, and 2) uncertainty about the network structure makes it considerably more difficult to coordinate on a demanding, but efficient, equilibrium that is typically implemented with complete information.
Keywords: random networks, incomplete information, connectivity, clustering, strategic substitutes, strategic complements, experiment
JEL: C71 C91 D03 D85

Experimental Games on Networks: Underpinnings of Behavior and Equilibrium Selection

Date: 2013-07-22
By: Charness, Gary
Feri, Francesco
Meléndez-Jiménez, Miguel A
Sutter, Matthias
URL: http://d.repec.org/n?u=RePEc:cdl:ucsbec:qt6m0584qv&r=net
Keywords: Social and Behavioral Sciences

Abstract.

We study behavior and equilibrium selection in network games. We conduct a series of experiments (with 580 participants) in which actions are either strategic substitutes or strategic complements, and participants have either complete or incomplete information about the structure of a random network. In our initial set of experiments on 5-person networks, we find a great deal of qualitative and quantitative support for the theoretical predictions of the Galeotti, Goyal, Jackson, Vega-Redondo, and Yariv (2010) model. The degree of equilibrium play is striking, in particular with incomplete information. There are intriguing patterns in our data, such as a taste for positive payoffs (but also security) when this supports the choice of one of the potential equilibria in a complete-information setting. To shed further light on the underpinnings of behavior and equilibrium selection in the laboratory, we study three more 5-person networks and test robustness by conducting sessions with three 20-person networks. Overall, we see strong evidence that choices and the equilibrium played depend on one’s degree and the connectivity of the network, and suggestive evidence that choices also depend on the clustering in the network.
JEL Codes: C71, C91, D03, D85
Keywords: Random networks; Incomplete information; Connectivity; Clustering; Strategic substitutes; Strategic complements; Experiment

Equilibrium Selection in Experimental Games on Networks

Gary Charness, Francesco Feri, Miguel A. Meléndez-Jiménez, and Matthias Sutte (2012) “Equilibrium Selection in Experimental Games on Networks." working paper, Department of Economics, UC Santa Barbara. [pdf] [ideas]

 

==Abstract==

Abstract. We study behavior and equilibrium selection in experimental network games. We vary two  important  factors:  (a) actions are either  strategic  substitutes or  strategic complements, and (b)  subjects  have  either  complete  or  incomplete  information  about  the  structure  of  a  random network.  Play  conforms  strongly  to  the  theoretical  predictions,  providing  an  impressive behavioral  confirmation  of  the  Galeotti,  Goyal,  Jackson,  Vega-Redondo,  and  Yariv  (2010) model. The degree of  equilibrium play  is  striking,  even with  incomplete  information. We  find that  under  complete  information,  subjects  typically  play  the  stochastically-stable  (inefficient) equilibrium when the game involves strategic substitutes, but play the efficient one with strategic complements.   Our  results  suggest  that  equilibrium multiplicity may  not  be  a major  concern Subjects’ actions and realized outcomes under  incomplete  information depend strongly on both the degree and the connectivity. When there are multiple equilibria, subjects begin by playing the efficient equilibrium, but eventually converge to the inefficient one.