Social Network Effects on Coordination: A Laboratory Investigation

30 Pages Posted: 9 Feb 2012

See all articles by Yang Zhang

Yang Zhang

Pennsylvania State University - Department of Supply Chain & Information Systems

Gary E. Bolton

Pennsylvania State University - Department of Supply Chain & Information Systems

Date Written: February 7, 2012

Abstract

Does social network structure influence coordination? We examine a coordination game in which each player engages with an exogenously connected “local” subset of the player population, the pattern of links defining a social network. Players know the number of local links they possess but otherwise have incomplete information about the global network structure. All networks in our experiment have the same pooling equilibria. Each also exhibits separating equilibria in which player actions differ by the number of local social links they possess. We investigate two potential network effects on equilibrium selection: the global network effect as represented by the density of the grand network, and the local network effect as represented by the number of local links an individual has. In high-density networks, we observe coordination consistent with the payoff-dominant pooling equilibrium. In the sparser networks, more connected players exhibit higher levels of coordination than do players having fewer social links, with overall coordination levels consistent with separating equilibria. Our findings indicate that network density, individual connectivity, and economic return modulate the amount of strategic risk in coordinating and can account for the pattern of equilibrium selection we observe.

Keywords: social network, coordination, behavioral economics

JEL Classification: C72

Suggested Citation

Zhang, Yang and Bolton, Gary Eugene, Social Network Effects on Coordination: A Laboratory Investigation (February 7, 2012). Available at SSRN: https://ssrn.com/abstract=2000974 or http://dx.doi.org/10.2139/ssrn.2000974

Yang Zhang (Contact Author)

Pennsylvania State University - Department of Supply Chain & Information Systems ( email )

Dept. of Supply Chain & Information Systems
Smeal College of Business
University Park, PA 16802
United States

Gary Eugene Bolton

Pennsylvania State University - Department of Supply Chain & Information Systems ( email )

Dept. of Supply Chain & Information Systems
University Park, PA 16802-3306
United States
814-865-0611 (Phone)
814-863-2381 (Fax)

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