Network Structure and Strategic Investments: An Experimental Analysis

S. Rosenkranz; U. Weitzel

Network Structure and Strategic Investments: An Experimental Analysis

Research output: Working paper › Academic

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.

Original language	English
Place of Publication	Utrecht
Publisher	UU USE Tjalling C. Koopmans Research Institute
Number of pages	37
Publication status	Published - May 2008

Publication series

Name	Discussion Paper Series / Tjalling C. Koopmans Research Institute
No.	24
Volume	08
ISSN (Electronic)	2666-8238

Keywords

Social networks
experiment
coordination
strategic substitutes
risk aversion

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abstract = "This paper analyzes the effects of network positions and individual risk attitudes onindividuals{\textquoteright} strategic decisions in an experiment where actions are strategicsubstitutes. The game theoretic basis for our experiment is the model of Bramoull{\'e}and Kranton (2007). In particular, we are interested in disentangling the influenceof global, local and individual factors. We study subjects{\textquoteright} strategic investmentdecisions in four basic network structures. As predicted, we find that global factors,such as the regularity of the network structure, influence behavior. However, wealso find evidence that individual play in networks is to some extent boundedlyrational, in the sense that coordination is influenced by local and individual factors,such as the number of (direct) neighbors, local clustering and individuals{\textquoteright} riskattitudes.",

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AB - This paper analyzes the effects of network positions and individual risk attitudes onindividuals’ strategic decisions in an experiment where actions are strategicsubstitutes. The game theoretic basis for our experiment is the model of Bramoulléand Kranton (2007). In particular, we are interested in disentangling the influenceof global, local and individual factors. We study subjects’ strategic investmentdecisions in four basic network structures. As predicted, we find that global factors,such as the regularity of the network structure, influence behavior. However, wealso find evidence that individual play in networks is to some extent boundedlyrational, in the sense that coordination is influenced by local and individual factors,such as the number of (direct) neighbors, local clustering and individuals’ riskattitudes.

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KW - experiment

KW - coordination

KW - strategic substitutes

KW - risk aversion

M3 - Working paper

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BT - Network Structure and Strategic Investments: An Experimental Analysis

PB - UU USE Tjalling C. Koopmans Research Institute

CY - Utrecht

ER -

Network Structure and Strategic Investments: An Experimental Analysis

Abstract

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Keywords

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