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. 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.