Efficiency Gains through Social Influence in a Minimum Effort Game

53 Pages Posted: 1 Feb 2020

See all articles by Jasmina Arifovic

Jasmina Arifovic

Simon Fraser University (SFU) - Department of Economics

Herbert Dawid

Bielefeld University - Department of Business Administration and Economics; Center for Mathematical Economics

Mariam Nanumyan

Bielefeld University - Department of Business Administration and Economics

Date Written: January 1, 2020

Abstract

In this paper we explore the role of social influence for the coordination of effort choice in a game with strategic complementarities. Players are repeatedly randomly partitioned in groups to play a minimum effort game and choose their effort based on their beliefs about the minimal effort among the other members of their group. Individual expectations about this minimal effort is influenced by own experience as well as by communication of beliefs within a social network. We show that increasing the importance of social influence in the expectation formation process has positive effects on the emerging (long run) effort level, thereby improving the efficiency of the outcome. Furthermore, a more centralized social network leads to higher average efficiency, but also to increased variance of outcomes. Finally, communication of actual minimum effort cannot replace the communication of beliefs as a device fostering the emergence of high long run effort.

Keywords: Minimum Effort Game, Expectation Formation, Social Influence, Belief Communication

JEL Classification: C63, C73, D83

Suggested Citation

Arifovic, Jasmina and Dawid, Herbert and Nanumyan, Mariam, Efficiency Gains through Social Influence in a Minimum Effort Game (January 1, 2020). Bielefeld Working Papers in Economics and Management No. 01-2020 , Available at SSRN: https://ssrn.com/abstract=3529099 or http://dx.doi.org/10.2139/ssrn.3529099

Jasmina Arifovic (Contact Author)

Simon Fraser University (SFU) - Department of Economics ( email )

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Canada
604-291-3508 (Phone)
604-291-5944 (Fax)

Herbert Dawid

Bielefeld University - Department of Business Administration and Economics ( email )

P.O. Box 100131
D-33501 Bielefeld, NRW 33501
Germany
+49-521-1064843 (Phone)
+49-521-1062994 (Fax)

Center for Mathematical Economics ( email )

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Bielefeld, D-33501
Germany

Mariam Nanumyan

Bielefeld University - Department of Business Administration and Economics ( email )

P.O. Box 100131
D-33501 Bielefeld, NRW 33501
Germany

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