Efficiency and Equilibrium in Network Games: An Experiment

The tension between efficiency and equilibrium is a central feature of economic systems. We examine this tradeoff in a network game with a unique Nash equilibrium in which agents can achieve a higher payoff by following a “collaborative norm.” Subjects establish and maintain a collaborative norm in...

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Bibliographic Details
Published in:The review of economics and statistics 2023-11, Vol.105 (6), p.1515-1529
Main Authors: Gallo, Edoardo, Yan, Chang
Format: Article
Language:English
Subjects:
Economic systems
Equilibrium
Games
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Summary:The tension between efficiency and equilibrium is a central feature of economic systems. We examine this tradeoff in a network game with a unique Nash equilibrium in which agents can achieve a higher payoff by following a “collaborative norm.” Subjects establish and maintain a collaborative norm in the circle, but the norm weakens with the introduction of one hub connected to everyone in the wheel. In complex and asymmetric networks of 15 and 21 nodes, the norm disappears and subjects' play converges to Nash. We provide evidence that subjects base their decisions on their degree, rather than the overall network structure.
ISSN:0034-6535
1530-9142
DOI:10.1162/rest_a_01105