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Network Structure and Strategic Investments: An Experimental Analysis

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  • Stephanie Rosenkranz

    ()

  • Utz Weitzel

    ()

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 Bramoulle 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 Utrecht School of Economics in its series Working Papers with number 08-24.

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Length: 37 pages
Date of creation: May 2008
Date of revision:
Handle: RePEc:use:tkiwps:0824

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

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