Experimental Games on Networks: Underpinnings of Behavior and Equilibrium Selection

89 Pages Posted: 19 Apr 2014

See all articles by Gary Charness

Gary Charness

University of California, Santa Barbara (UCSB) - Department of Economics

Francesco Feri

University of London

Miguel Melendez-Jimenez

Universidad de Alicante

Matthias Sutter

Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Research on Collective Goods; University of Cologne - Department of Economics

Abstract

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 Classification: C71, C91, D03, D85

Suggested Citation

Charness, Gary and Feri, Francesco and Melendez-Jimenez, Miguel and Sutter, Matthias, Experimental Games on Networks: Underpinnings of Behavior and Equilibrium Selection. IZA Discussion Paper No. 8104. Available at SSRN: https://ssrn.com/abstract=2426858

Gary Charness (Contact Author)

University of California, Santa Barbara (UCSB) - Department of Economics ( email )

2127 North Hall
Santa Barbara, CA 93106
United States
805-893-2412 (Phone)
805-893-8830 (Fax)

Francesco Feri

University of London ( email )

Senate House
Malet Street
London, WC1E 7HU
United Kingdom

Miguel Melendez-Jimenez

Universidad de Alicante ( email )

Campus de San Vicente
Carretera San Vicente del Raspeig
San Vicente del Raspeig, 03690
Spain

Matthias Sutter

Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Research on Collective Goods ( email )

Kurt-Schumacher-Str. 10
D-53113 Bonn, 53113
Germany

University of Cologne - Department of Economics

Cologne, 50923
Germany

Register to save articles to
your library

Register

Paper statistics

Downloads
159
Abstract Views
717
rank
183,833
PlumX Metrics