Network Structure and Strategic Investments: An Experimental Analysis
revised version of this discussion paper published as: S. Rosenkranz, U. Weitzel (2012): “Network Structure and Strategic Investments: An Experimental Analysis”, Games and Economic Behavior, 75 (2): 898-920
37 Pages Posted: 23 May 2008 Last revised: 16 Feb 2013
Date Written: May 1, 2008
This paper analyzes the effects of network positions and individual risk attitudes on individuals' strategic decisions in an experiment where actions are strategic substitutes. The game theoretic basis for our experiment is the model of Bramoullé and Kranton (2007). In particular, we are interested in disentangling the influence of global, local and individual factors. We study subjects' strategic investment decisions in four basic network structures. As predicted, we find that global factors, such as the regularity of the network structure, influence behavior. However, we also find evidence that individual play in networks is to some extent boundedly rational, in the sense that coordination is influenced by local and individual factors, such as the number of (direct) neighbors, local clustering and individuals' risk attitudes.
Keywords: Social networks, experiment, coordination, strategic substitutes, risk aversion
JEL Classification: C91, D00, D81, D85, C72, H41
Suggested Citation: Suggested Citation