Social Network Effects on Coordination A Laboratory Investigation

Does social network structure influence coordination? We examine a coordination game in which each player engages with an exogenously connected “local” subset of the player population, the pattern of links defining a social network. Players know the number of local links they possess but otherwise have incomplete information about the global network structure. All networks in our experiment have the same pooling equilibria. Each also exhibits separating equilibria in which player actions differ by the number of local social links they possess. We investigate two potential network effects on equilibrium selection: the global network effect as represented by the density of the grand network, and the local network effect as represented by the number of local links an individual has. In high-density networks, we observe coordination consistent with the payoff-dominant pooling equilibrium. In the sparser networks, more connected players exhibit higher levels of coordination than do players having fewer social links, with overall coordination levels consistent with separating equilibria. Our findings indicate that network density, individual connectivity, and economic return modulate the amount of strategic risk in coordinating and can account for the pattern of equilibrium selection we observe.