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Network Structure and Strategic Investments: An Experimental Analysis

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  • Rosenkranz, Stephanie
  • Weitzel, Utz

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.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 6855.

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Date of creation: Jun 2008
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Handle: RePEc:cpr:ceprdp:6855

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Keywords: coordination; experiment; risk aversion; Social networks; strategic substitutes;

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Citations

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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 13-112/I, Tinbergen Institute.
  2. Gary Charness & Francesco Feri & Miguel A. Meléndez-Jiménez & Matthias Sutter, 2014. "Experimental games on networks: Underpinnings of behavior and equilibrium selection," Working Papers 2014-14, Faculty of Economics and Statistics, University of Innsbruck.
  3. Sanjeev Goyal & Stephanie Rosenkranz & Utz Weitzel & Vincent Buskens, 2014. "Individual Search and Social Networks," Working Papers 2014.49, Fondazione Eni Enrico Mattei.

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