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

46 Pages Posted: 18 Jul 2022

See all articles by Sharon Harrison

Sharon Harrison

Columbia University - Barnard College

Pietro Battiston

University of Pisa - Department of Economics and Management

Multiple version iconThere are 3 versions of this paper

Abstract

Models with sunspot equilibria have long been a topic of interest among economists. It then became an interesting question to ask whether there is empirical support for their existence. One approach to answer 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, connected through a network, directly observe the actions of their neighbors as well as aggregated information. By manipulating both the type of information available and the structure of the network, 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

Suggested Citation

Harrison, Sharon and Battiston, Pietro, Believe it or Not: Experimental Evidence on Sunspot Equilibria with Social Networks. Available at SSRN: https://ssrn.com/abstract=4166367 or http://dx.doi.org/10.2139/ssrn.4166367

Sharon Harrison (Contact Author)

Columbia University - Barnard College ( email )

3009 Broadway
New York, NY 10027
United States

Pietro Battiston

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

Pisa
Italy

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