Network structure and strategic investments: An experimental analysis

Abstract

This paper analyzes the effects of network positions and individual risk attitudes on individuals' strategic decisions in an experiment where actions are strategic substitutes. The game theoretic basis for our experiment is the model of Bramoullé and Kranton (2007). In particular, we are interested in disentangling the influence of global, local and individual factors. We study subjects' strategic investment decisions in four basic network structures. As predicted, we find that global factors, such as the regularity of the network structure, influence behavior. However, we also find evidence that individual play in networks is to some extent boundedly rational, in the sense that coordination is influenced by local and individual factors, such as the number of (direct) neighbors, local clustering and individuals' risk attitudes.

Experimental Games on Networks: Underpinnings of Behavior and Equilibrium Selection

“…With substitutes there are more subtle considerations, since the equilibria are not Pareto-ranked and, therefore, there are individuals in different positions that (strictly) prefer different equilibria. Our results suggest that, in this case, security/stability considerations play an important role in the equilibrium selected (in line with the findings of Rosenkranz and Weitzel, 2012). Table 6 presents the summary statistics for behavior with incomplete information and both strategic substitutes and complements under each probability regime, as well as the marginal effects on activity.…”

“…Within the scope of experimental games of strategic substitutes played in networks, the most closely related paper to our study is Rosenkranz and Weitzel (2012). They consider the public-goods game on networks studied theoretically by Bramoulle and Kranton (2007), which is similar to our environments with strategic substitutes and complete information.…”

“…This is not unfamiliar in other coordination games. For example, Rosenkranz and Weitzel (2012) report that, when they find convergence, it is to equilibria where each inactive player is connected to at least two active players.…”

Incomplete punishment networks in public goods games: experimental evidence

“…3 Finally, individual punishment endowments and total punishment capacities are controlled for 2 The influence of exogenous and endogenous networks has been explored in other settings such as coordination games (Keser et al 1998), stag-hunt games (Charness and Jackson 2007), games of strategic investments (Rosenkranz and Weitzel 2012) and bargaining games ). For a survey, see Kosfeld (2004).…”

Superstars Need Social Benefits: An Experiment on Network Formation

“…Rosenkranz and Weitzel (2012) experimentally investigate the public good game by Bramoullé and Kranton (2007), which is also the game participants play in our endogenous network setting. They vary the (exogenously imposed) network structure between treatments.…”