Strategies in Social Network Formation

We run a computerised experiment of network formation where all connections are beneficial and only direct links are costly. Players simultaneously submit link proposals; a connection is made only when both players involved agree. We use both simulated and experimentally generated data to test the determinants of individual behaviour in network formation. We find that approximately 40% of the network formation strategies adopted by the experimental subjects can be accounted for as best responses. We test whether subjects follow alternative patterns of behaviour and in particular if they: propose links to those from whom they have received link proposals in the previous round; propose links to those who have the largest number of direct connections. We find that together with best response behaviour, these strategies explain approximately 75% of the observed choices. We estimate individual propensities to adopt each of these strategies, controlling for group effects. Finally we estimate a mixture model to highlight the proportion of each type of decision maker in the population.network formation, experiments, mixture models

Behavioural patterns in social networks

In this paper, we focus on the analysis of individual decision making for the formation of social networks, using experimentally generated data. We first analyse the determinants of the individual demand for links under the assumption of agents' static expectations. The results of this exercise subsequently allow us to identify patterns of behaviour that can be subsumed in three strategies of link formation: 1) reciprocator strategy - players propose links to those from whom they have received link proposals in the previous round; 2) myopic best response strategy - players aim to profit from maximisation; 3) opportunistic strategy - players reciprocate link proposals to those who have the largest number of connections. We find that these strategies explain approximately 76% of the observed choices. We finally estimate a mixture model to highlight the proportion of the population who adopt each of these strategies.Network formation, Experiments, Multivariate probit models, Mixture models

Are Individuals Profit Maximising in Network Formation? Some Experimental Evidence

We run a computerised experiment of network formation, where all connections are beneficial and only direct links are costly. The game-theoretic basis for the experiment is the model of Goyal and Joshi (2004)where players simultaneously submit link proposals and a connection is made only when both players involved agree. We provide an analysis both at the macro and the micro level. From a macro perspective, in accordance with the exsisting literature, we find that convergence to the stable network architecture is made problematic by the presence of multi- ple equilibria. At the level of the individual, we estimate the probability of a link through a probit model that includes both best-response and behavioural variables. We find strong evidence that both play a role in network formation.We run a computerised experiment of network formation, where all connections are beneficial and only direct links are costly. The game-theoretic basis for the experiment is the model of Goyal and Joshi (2004)where players simultaneously submit link proposals and a connection is made only when both players involved agree. We provide an analysis both at the macro and the micro level. From a macro perspective, in accordance with the exsisting literature, we find that convergence to the stable network architecture is made problematic by the presence of multi- ple equilibria. At the level of the individual, we estimate the probability of a link through a probit model that includes both best-response and behavioural variables. We find strong evidence that both play a role in network formation.Non-Refereed Working Papers / of national relevance onl

Does Money Impede Convergence?

Inspired by Clower’s conjecture that the necessity of trading through money in monetised economies might hinder convergence to competitive equilibrium, and hence, for example, cause unemployment, we experimentally investigate behaviour in markets where trading has to be done through money. In order to evaluate the properties of these markets, we compare their behaviour to behaviour in markets without money, where money cannot intervene. As the trading mechanism might be a compounding factor, we investigate two kinds of market mechanism: the double auction, where bids, asks and trades take place in continuous time throughout a trading period; and the clearing house, where bids and asks are placed once in a trading period, and which are then cleared by an aggregating device. We thus have four treatments, the pairwise combinations of non-monetised/monetised trading with double auction/clearing house. We find that: convergence is faster under non-monetised trading, implying that the necessity of using money to facilitate trade hinders convergence; that monetised trading is noisier than non-monetised trading; and that the volume of trade and realised surpluses are higher with the double auction than the clearing house. As far as efficiency is concerned, monetised trading lowers both informational and allocational efficiency, and while the double auction outperforms the clearing house in terms of allocational efficiency, the clearing house is marginally better than the double auction in terms of informational efficiency when trade is through money. Crucially we confirm the conjecture that inspired these experiments: that the necessity to use money in trading hinders convergence to competitive equilibrium, lowers realised trades and surpluses, and hence may cause unemployment

Rana, formichiere o un milione di euro? Il caso “Affari Tuoi”. Un’analisi delle scelte in condizioni di incertezza in un esperimento naturale.

Non-Refereed Working Papers / of national relevance onl

Gender effects and third-party punishment in social dilemma games

This paper investigates whether altruistic punishment when cooperation norms are violated is sensitive to gender effects. Our framework is a one-shot social dilemma game with third-party punishment in which subjects are informed of the others’ gender within their group. This allows us to test whether third-party punishment depends on the punisher’s as well as on the contributors’ gender. We include treatments where the contributors have either the same or different gender from that of the third-party punishers. Our findings indicate that the assignment of altruistic punishment is gender sensitive. While third-party punishment is assigned similarly when contributors have the same gender as third-party punishers, this is not the case when the gender of the contributors and third-party punishers is different. Third-party male punishers sanction significantly harsher female contributors and earn significantly less relative to third-party female punishers when matched with male contributors. Overall, our results have important implications for the design of teams in the presence of free-riding incentives

Trusting versus monitoring: an experiment of endogenous institutional choices

We investigate the problem of deciding between trusting and monitoring, and how this decision affects subsequent behavior, using a laboratory experiment where subjects choose between the Ultimatum and the Yes-No Game. Despite the similarity of the two games in Ultimatum Games responders monitor the allocation proposal, while in Yes-No games responders react without monitoring, i.e. have to rely on trust. We permit either the proposer or responder to make the game choice and analyze how both roles choose between trusting and monitoring, what the ensuing effects of their choices are, and how they vary depending on who has chosen the game. We, also, experimentally vary the cost of monitoring and the responder’s conflict payoff. Since monitoring is usually costly, the amount to share in Yes-No Games (YNG) can exceed that in Ultimatum Games (UG). Regarding the conflict payoff, it can be positive or negative with the former rendering Yes-No interaction a social dilemma. According to our results, proposers (responders) opt for trusting significantly more (less) often than for monitoring. Average offers are higher in Ultimatum than in Yes-No games, but neither UG nor YNG offers depend on who has chosen between games

Risk attitude in real decision problems

Experimental economics focuses on eliciting preferences, studying individuals one at a time to take into account their heterogeneity. Experiments have the appealing property of collecting enough observations to perform such an analysis. In real word, and in natural experiments, individuals cannot be observed according to experimenters’ needs. We propose a method that aggregates over individuals taking into account their heterogeneity. Using data from a natural experiment, we estimate three models of decision making under risk: Expected Utility, Rank-Dependent Expected Utility and Regret-Rejoice. Our results show that individual-wise analyses can be substituted by pooled approaches without losing information about individual heterogeneity.Experimental economics focuses on eliciting preferences, studying individuals one at a time to take into account their heterogeneity. Experiments have the appealing property of collecting enough observations to perform such an analysis. In real word, and in natural experiments, individuals cannot be observed according to experimenters’ needs. We propose a method that aggregates over individuals taking into account their heterogeneity. Using data from a natural experiment, we estimate three models of decision making under risk: Expected Utility, Rank-Dependent Expected Utility and Regret-Rejoice. Our results show that individual-wise analyses can be substituted by pooled approaches without losing information about individual heterogeneity

A Test of the Rational Expectations Hypothesis using data from a Natural Experiment

Data on contestants' choices in Italian Game Show Affari Tuoi are analysed in a way that separates the effect of risk attitude (preferences) from that of beliefs concerning the amount of money that will be offered to contestants in future rounds. The most important issue addressed in the paper is what belief function is actually being used by contestants. The parameters of this function are estimated freely along with the parameters of a choice model. Separate identification of the belief function and preferences is possible by virtue of the fact that at a certain stage of the game, beliefs are not relevant, and risk attitude is the sole determinant of choice. The rational expectations hypothesis is tested by comparing the estimated belief function with the "true" offer function which is estimated using data on offers actually made to contestants. We find that there is a significant difference between these two functions, and hence we reject the rational expectations hypothesis. However, when a simpler "rule-of-thumb" structure is as- sumed for the belief function, we find a correspondence to the function obtained from data on actual offers. Our overall conclusion is that contestants are rational to the extent that they make use of all available relevant information, but are not fully rational because they are not processing the information in an optimal way. The importance of belief-formation is confirmed by the estimation of a mixture model which establishes that the vast majority of contestants are forward-looking as opposed to myopic.Beliefs, Discrete choice models, Method of simulated likelihood, Natural Experiments, rational expectations, risky choice

Anticipatory Feelings in Intertemporal Choice on Consumption: A Dynamic Experiment

Following the evaluation of anticipatory feelings in Scitovsky\u2019s Joyless Economy, we explored a specific interpretation of reversals in intertemporal choice. Anticipatory feelings can be explained as the feeling experienced by the agent while awaiting an upcoming event. We adopted a dynamic experiment where individuals made decisions of consumption at multiple points of time: three experimental sessions in three different dates at two-week intervals. We elicited the initial plans of the same sample in three different sessions over a one-month period and tracked how they implemented their plans as the anticipated event drew closer. The paper innovates with respect to the literature on intertemporal decision making in that the motivation for a varying discount rate, caused by anticipation or procrastination, has been elicited with both monetary and non-monetary (consumption) incentives and within a dynamic setting. We found that anticipatory feeling is a significant possible explanation behind choice reversal. The results remained significant after controlling the other explanatory factors such as risk aversion, uncertainty and time inconsistency