TY - JOUR
T1 - Network structure and strategic investments
T2 - An experimental analysis
AU - Rosenkranz, Stephanie
AU - Weitzel, Utz
PY - 2012/7/1
Y1 - 2012/7/1
N2 - This paper experimentally analyzes the effect of network structures on individuals' decisions in a game of strategic substitutes. The theoretical basis for our experiment is the model of Bramoullé and Kranton (2007). As predicted, we find that individuals are able to coordinate on equilibria, but that coordination strongly depends on the network structure. Despite frequent coordination failures, in graphs of size N= 4 equilibrium play seems easier on network architectures with high (low) density and low (high) centrality. If play converges, it almost exclusively does so towards the predicted equilibria. Theoretical results with respect to welfare are also confirmed. Next to global graph structural properties we also explore the effects of local and individual factors. We find that behavior on networks is affected by the number of (direct) neighbors, but not by individuals' risk attitudes. Apparently, the global and the local structure of a network does not leave much explanatory room for individual effects that pertain to risk taking.
AB - This paper experimentally analyzes the effect of network structures on individuals' decisions in a game of strategic substitutes. The theoretical basis for our experiment is the model of Bramoullé and Kranton (2007). As predicted, we find that individuals are able to coordinate on equilibria, but that coordination strongly depends on the network structure. Despite frequent coordination failures, in graphs of size N= 4 equilibrium play seems easier on network architectures with high (low) density and low (high) centrality. If play converges, it almost exclusively does so towards the predicted equilibria. Theoretical results with respect to welfare are also confirmed. Next to global graph structural properties we also explore the effects of local and individual factors. We find that behavior on networks is affected by the number of (direct) neighbors, but not by individuals' risk attitudes. Apparently, the global and the local structure of a network does not leave much explanatory room for individual effects that pertain to risk taking.
KW - Coordination
KW - Experiment
KW - Risk aversion
KW - Social networks
KW - Strategic substitutes
UR - http://www.scopus.com/inward/record.url?scp=84860609592&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=84860609592&partnerID=8YFLogxK
U2 - 10.1016/j.geb.2012.02.003
DO - 10.1016/j.geb.2012.02.003
M3 - Article
AN - SCOPUS:84860609592
SN - 0899-8256
VL - 75
SP - 898
EP - 920
JO - Games and Economic Behavior
JF - Games and Economic Behavior
IS - 2
ER -