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Equilibrium Selection in Experimental Games on Networks

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  • Charness, Gary
  • Feri, Francesco
  • Meléndez-Jiménez, Miguel A.
  • Sutter, Matthias

Abstract

We study behavior and equilibrium selection in experimental network games. We varytwo important factors: (a) actions are either strategic substitutes or strategic complements, and(b) subjects have either complete or incomplete information about the structure of a randomnetwork. Play conforms strongly to the theoretical predictions, providing an impressivebehavioral confirmation of the Galeotti, Goyal, Jackson, Vega-Redondo, and Yariv (2010)model. The degree of equilibrium play is striking, even with incomplete information. We findthat under complete information, subjects typically play the stochastically-stable (inefficient)equilibrium when the game involves strategic substitutes, but play the efficient one with strategiccomplements. Our results suggest that equilibrium multiplicity may not be a major concern.Subjects’ actions and realized outcomes under incomplete information depend strongly on boththe degree and the connectivity. When there are multiple equilibria, subjects begin by playing theefficient equilibrium, but eventually converge to the inefficient one.

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Bibliographic Info

Paper provided by Department of Economics, UC Santa Barbara in its series University of California at Santa Barbara, Economics Working Paper Series with number qt51v6w9hd.

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Date of creation: 18 Feb 2012
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Handle: RePEc:cdl:ucsbec:qt51v6w9hd

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Keywords: Social and Behavioral Sciences; random networks; incomplete information; strategic substitutes; strategic complements; experiment;

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Cited by:
  1. Boris van Leeuwen & Theo Offerman & Arthur Schram, 2013. "Superstars Need Social Benefits: An Experiment on Network Formation," Tinbergen Institute Discussion Papers, Tinbergen Institute 13-112/I, Tinbergen Institute.
  2. Charness, Gary & Feri, Francesco & Meléndez-Jiménez, Miguel A. & Sutter, Matthias, 2014. "Experimental Games on Networks: Underpinnings of Behavior and Equilibrium Selection," IZA Discussion Papers 8104, Institute for the Study of Labor (IZA).

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