An Experimental Study on the Effects of Communication, Credibility, and Clustering in Network Games
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A Service of Leibniz-Informationszentrum econstor Wirtschaft Leibniz Information Centre Make Your Publications Visible. zbw for Economics Charness, Gary; Feri, Francesco; Meléndez-Jiménez, Miguel A.; Sutter, Matthias Working Paper An experimental study on the effects of communication, credibility, and clustering in network games CESifo Working Paper, No. 7659 Provided in Cooperation with: Ifo Institute – Leibniz Institute for Economic Research at the University of Munich Suggested Citation: Charness, Gary; Feri, Francesco; Meléndez-Jiménez, Miguel A.; Sutter, Matthias (2019) : An experimental study on the effects of communication, credibility, and clustering in network games, CESifo Working Paper, No. 7659, Center for Economic Studies and ifo Institute (CESifo), Munich This Version is available at: http://hdl.handle.net/10419/201885 Standard-Nutzungsbedingungen: Terms of use: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Documents in EconStor may be saved and copied for your Zwecken und zum Privatgebrauch gespeichert und kopiert werden. personal and scholarly purposes. 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Meléndez-Jiménez, Matthias Sutter Impressum: CESifo Working Papers ISSN 2364-1428 (electronic version) Publisher and distributor: Munich Society for the Promotion of Economic Research - CESifo GmbH The international platform of Ludwigs-Maximilians University’s Center for Economic Studies and the ifo Institute Poschingerstr. 5, 81679 Munich, Germany Telephone +49 (0)89 2180-2740, Telefax +49 (0)89 2180-17845, email [email protected] Editor: Clemens Fuest www.cesifo-group.org/wp An electronic version of the paper may be downloaded · from the SSRN website: www.SSRN.com · from the RePEc website: www.RePEc.org · from the CESifo website: www.CESifo-group.org/wp CESifo Working Paper No. 7659 Category 13: Behavioural Economics An experimental study on the effects of communication, credibility, and clustering in network games Abstract The effectiveness of social interaction depends strongly on an ability to coordinate actions efficiently. In large networks, such coordination may be very difficult to achieve and may depend on the communication technology and the network structure. We examine how pre-play communication and clustering within networks affect coordination in a challenging experimental game on eight-person networks. Free-form chat is enormously effective in achieving the non-equilibrium efficient outcome in our game, but restricted communication (where subjects can only indicate their intended action) is almost entirely ineffective. We can rationalize this result with a novel model about the credibility of cheap-talk messages. This credibility is much larger with freeform message communication than with restricted communication. We are the first to model this credibility and show, both theoretically and experimentally, an interaction effect of network structure and communication technologies. We also provide a model of message diffusion, which indeed predicts that diffusion will be more rapid without clustering and is consistent with our data. JEL-Codes: C710, C910, D030, D850. Keywords: networks, clustering, communication, credibility, cheap talk, experiment. Gary Charness Francesco Feri University of California at Santa Barbara Royal Holloway University of London Santa Barbara / CA / USA London / United Kingdom [email protected] [email protected] Miguel A. Meléndez-Jiménez Matthias Sutter Universidad de Málaga Max Planck Institute Málaga / Spain Bonn / Germany [email protected] [email protected] May 12, 2019 We thank Ramon Cobo-Reyes, Brit Grosskopf, Armin Falk, Sanjeev Goyal, Erik Kimbrough, Arthur Robson, seminar participants at the 2016 ASSA meetings, University of Bonn (2016), CESifo, UCSB, Simon Fraser University, Stanford Institute for Theoretical Economics, the University of Cologne, Columbia University, University of East Anglia, University of Exeter, LBEG at LSE, the EEG-inaugural conference in Bonn (2018), the III BiNoMa workshop on economics of networks in Bilbao and the University of Portsmouth for helpful comments. Funding from Ministerio de Ciencia, Innovación y Universidades, Spain (ref. RTI2018-097620-B-I00) and the University of Cologne is gratefully acknowledged. 1. Introduction In many field environments, agents must coordinate their actions to achieve success. For example, collective action may only be effective when a threshold number of parties choose to participate in an action that is potentially risky. Think of hunting together or defending one’s territory against potential invaders, coordinating on a ceasefire in military conflict, or imagine companies coordinating on a new technological standard when competing platforms are available (Alos- Ferrer et al., 2010). Naturally, communication amongst the parties who are potentially involved may occur; yet this communication may need to be covert and so may be restricted to those people with whom one is directly linked. This creates a network setting in which individuals can interact only with other individuals who share a connection or link. Such networks – which form a bridge between bi-lateral interactions and full-fledged markets in which all agents can interact with all other agents – are ubiquitous and important for many domains in one’s life. Accordingly, Jackson (2010) states (p. 512) that one’s social network “influences patterns of decisions regarding education, career, hobbies, criminal activity, and even participation in micro-finance.” There is even evidence that social-media networks (e.g., Facebook and Twitter) have had a crucial role in the effectiveness of revolutions (e.g., the Arab Spring or the Hong Kong protests; see Parker, 2014). People might wish to participate in revolutions if enough others also participate, in which case the information flow in one’s network may become decisive.1 There could be one risky action that denotes active participation, a safe action of not participating, and perhaps some intermediate action like giving support to the revolution without actively participating. Another example for a collective-action problem with private prior communication is the decision by a firm’s workers to go on strike. Consider for example a situation in which each worker talks to his colleagues in the firm the day before the possible strike in order to make up his mind whether or not to support the strike the next day. These examples are complicated real-life situations with potentially many equilibria – so it is difficult to predict what will happen and it seems plausible that the network structure and the scope of communication among potentially-involved parties crucially impact the likelihood of successfully coordinating their actions. Given that the real-world examples discussed above are 1 For example, with Facebook one can see one’s friends’ messages and vice versa. People can resend messages (or give likes), and this information can then diffuse through the social network, triggering different kinds of actions. 1 too complex for one to carefully control the network structure and the communication between parties, we study such situations in detail in an abstract and controlled laboratory setting. Such a setting allows us to examine how network characteristics such as clustering and how different forms of pre-play communication – and the interaction between network structure and communication forms – affect coordination in a challenging network game. In our experiment, we form 8-person networks in which each person is linked to exactly four others. Only players who are linked can communicate with each other (see below for the forms of communication) and then play an extended stag hunt game in which we select (at random) one of the four neighbors as the interaction partner (strategically equivalent to a playing-the-field game). The extended stag hunt creates a challenging and novel game. It builds on the classic stag hunt game (Rousseau, 1755, 1988; Aumann, 1990; Charness, 2000) with two actions per player and two Pareto-ranked equilibria. In our extension, we add a third action that is strictly dominated by both other actions and so preserves the pure-strategy equilibria of the classic game. When played jointly, this third action leads to the highest social payoffs, but can never be a best response (in own payoffs) and one receives a zero payoff by choosing it when the other player does not.2 Our design varies two factors and the unique combination separates our paper from previous work and sheds light on the underpinnings of behavior and efficient