Believe it or not: Experimental Evidence on Sunspot Equilibria with Social Networks

Pietro Battiston and Sharon Harrison

No 422, Working Papers from University of Milano-Bicocca, Department of Economics

Abstract: Models with sunspot equilibria have long been a topic of interest among economists. It then becomes an interesting question to ask whether there is empirical support for their existence. One approach to answer this question is through lab experiments. Such equilibria have been successfully reproduced in the lab, but little is known about their determinants and, most importantly, about their convergence dynamics: when, and how, do individuals assign a coordination role to signals which are publicly known to have no fundamental value? In order to answer this question, we run a laboratory experiment in which individuals are connected through a network, and each of them directly observes the actions of her neighbors as well as aggregated information. By manipulating both the type of information available and the structure of the network, we study the extent to which players are able to converge, and how convergence happens over time. We show that general information about other players' behavior hinders coordination, while information specifically related to the sunspot enhances it.

Keywords: sunspot equilibrium; laboratory experiment; coordination; social networks; communication. (search for similar items in EconPapers)
JEL-codes: C92 D81 D85 (search for similar items in EconPapers)
Pages: 34
Date: 2019-11, Revised 2019-11
New Economics Papers: this item is included in nep-cdm and nep-exp
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Journal Article: Believe it or not: Experimental evidence on sunspot equilibria with social networks (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:mib:wpaper:422

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