Experimenting with strategic experimentation: Risk taking, neighborhood size and network structure

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This paper investigates the effects of neighborhood size and network structure on strategic experimentation. We analyze a multi-arm bandit game with one safe and two risky alternatives. In this setting, risk taking produces a learning externality and an opportunity for free riding. We conduct a laboratory experiment to investigate whether group size and the network structure affect risk taking. We find that group size has an effect on risk taking that is qualitatively in line with equilibrium predictions. Introducing an asymmetry among agents in the same network with respect to neighborhood size leads to substantial deviations from equilibrium play. Findings suggests that subjects react to changes in their direct neighborhood but fail to play a best-response to their position within the network.

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• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Jena Economic Research Papers ; No. 2010,011

Classification and Topics

• Classification: Wirtschaft ; Design of Experiments: Laboratory, Individual ; Criteria for Decision-Making under Risk and Uncertainty ; Network Formation and Analysis: Theory ; Technological Change: Choices and Consequences; Diffusion Processes
• Subject: strategic experimentation ; experiment ; bandit game ; risk taking ; Risikopräferenz ; Spieltheorie ; Test ; Nachbarschaftsökonomie ; Soziales Netzwerk

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Große, Niels Daniel
• Event: Veröffentlichung
• (who): Friedrich Schiller University Jena and Max Planck Institute of Economics
• (where): Jena
• (when): 2010

Further information

• Handle: http://hdl.handle.net/10419/32635