Believe It or Not: Experimental Evidence on Sunspot Equilibria with Social Networks

34 Pages Posted: 20 Nov 2019

See all articles by Pietro Battiston

Pietro Battiston

University of Pisa - Department of Economics and Management

Sharon Harrison

Columbia University

Multiple version iconThere are 3 versions of this paper

Date Written: November 19, 2019

Abstract

Models with sunspot equilibria have long been a topic of interest among economists. It then becomes an interesting question to ask whether there is empirical support for their existence. One approach to answering this question is through lab experiments. Such equilibria have been successfully reproduced in the lab, but little is known about their determinants and, most importantly, about their convergence dynamics: when, and how, do individuals assign a coordination role to signals which are publicly known to have no fundamental value? In order to answer this question, we run a laboratory experiment in which individuals are connected through a network, and each of them directly observes the actions of her neighbors as well as aggregated information. By manipulating both the type of information available and the structure of the network, we study the extent to which players are able to converge, and how convergence happens over time. We show that general information about other players’ behavior hinders coordination, while information specifically related to the sunspot enhances it.

Keywords: sunspot equilibrium, laboratory experiment, coordination, social networks, communication

JEL Classification: C92, D81, D85

Suggested Citation

Battiston, Pietro and Harrison, Sharon, Believe It or Not: Experimental Evidence on Sunspot Equilibria with Social Networks (November 19, 2019). University of Milan Bicocca Department of Economics, Management and Statistics Working Paper No. 422, 2019, Available at SSRN: https://ssrn.com/abstract=3489729 or http://dx.doi.org/10.2139/ssrn.3489729

Pietro Battiston (Contact Author)

University of Pisa - Department of Economics and Management ( email )

Pisa
Italy

Sharon Harrison

Columbia University ( email )

3022 Broadway
New York, NY 10027
United States

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