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.
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Keywords: | Random networks, Incomplete information, Connectivity, Clustering, Strategic substitutes, Strategic complements, Experiment |
JEL: | C71 C91 D03 D85 |
Tag Archives: random networks
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.
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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.