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Experimental Games on Networks: Underpinnings of Behavior and Equilibrium Selection
Author(s) -
Charness Gary,
Feri Francesco,
MeléndezJiménez Miguel A.,
Sutter Matthias
Publication year - 2014
Publication title -
econometrica
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 16.7
H-Index - 199
eISSN - 1468-0262
pISSN - 0012-9682
DOI - 10.3982/ecta11781
Subject(s) - complementarity (molecular biology) , aggregate (composite) , equilibrium selection , network formation , complete information , strategic complements , selection (genetic algorithm) , mathematical economics , computer science , variety (cybernetics) , degree (music) , attraction , economics , microeconomics , game theory , repeated game , artificial intelligence , linguistics , philosophy , genetics , materials science , physics , world wide web , acoustics , composite material , biology
In this paper, we describe a series of laboratory experiments that implement specific examples of a general network structure. Specifically, actions are either strategic substitutes or strategic complements, and participants have either complete or incomplete information about the structure of a random network. Since economic environments typically have a considerable degree of complementarity or substitutability, this framework applies to a wide variety of settings. We examine behavior and equilibrium selection. The degree of equilibrium play is striking, in particular with incomplete information. Behavior closely resembles the theoretical equilibrium whenever this is unique; when there are multiple equilibria, general features of networks, such as connectivity, clustering, and the degree of the players, help to predict informed behavior in the lab. People appear to be strongly attracted to maximizing aggregate payoffs (social efficiency), but there are forces that moderate this attraction: (1) people seem content with (in the aggregate) capturing only the lion's share of the efficient profits in exchange for reduced exposure to loss, and (2) uncertainty about the network structure makes it considerably more difficult to coordinate on a demanding, but efficient, equilibrium that is typically implemented with complete information.