Network Structure and Strategic Investments: An Experimental Analysis

Stephanie Rosenkranz and Utz Weitzel

No 6855, CEPR Discussion Papers from C.E.P.R. Discussion Papers

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 (search for similar items in EconPapers)
JEL-codes: C72 C91 D00 D81 D85 H41 (search for similar items in EconPapers)
Date: 2008-06
New Economics Papers: this item is included in nep-cse, nep-exp, nep-gth, nep-net and nep-soc
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Journal Article: Network structure and strategic investments: An experimental analysis (2012)
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