Working Paper: CEPR ID: DP6855
Authors: 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 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.
Keywords: coordination; experiment; risk aversion; social networks; strategic substitutes
JEL Codes: C72; C91; D00; D81; D85; H41
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| network structure (D85) | coordination on equilibria (D51) |
| number of neighbors (C45) | investment levels (F21) |
| risk aversion (D81) | investment levels (F21) |
| local factors (F29) | investment decisions (G11) |
| global factors (F69) | investment decisions (G11) |