Speaker: Daniel Houser (George Mason University)
Theme: «Emergent Star Networks with Ex Ante Homogeneous Agents» (joint with Rong Rong)
On Tuesday, May 22 at 4.40 pm International College of Economics and Finance held Research seminar.
Speaker: Daniel Houser (George Mason University)
Theme: «Emergent Star Networks with Ex Ante Homogeneous Agents» (joint with Rong Rong)
Venue: Pokrovski Bulvar, 11, Room Zh-822
Abstract: Information dispersion, a critical aspect of economic decisions, can occur through market systems or a network of agents (Jackson, 2009). Empirical and theoretical findings suggest that an efficient information dispersion network takes the form of a star: small numbers of agents gather information and distribute it to a large group (Weimann, 1994; Rogers, 1995; Bala and Goyal, 2000; Galeotti and Goyal, 2010). Despite these findings, controlled tests of this theory have generally failed to find evidence of the emergence of such networks. An exception is Goeree et al (2008), which reports frequent star networks under the assumptions of ex ante agent heterogeneity and perfect information. Unfortunately, these conditions are unlikely to characterize natural environments (Feick and Price, 1987; Conley and Udry, 2010); as a result, the conditions that promote star networks remain largely unknown. Drawing from institutions that exist in natural environments, we design experiments to shed light on this issue. We find that investment limits and the “right-of-first-refusal,” both of which are regular features of naturally- occurring star networks, have a surprisingly strong ability to promote the formation of star networks, even when agents are ex ante homogeneous. Using a cluster analysis, we are able to trace the large positive effects of these institutions to the impact they have on individuals’ specific behaviors. In particular, we find that these institutions encourage individual rationality, as well as positive habits that facilitate the formation, stability, and reliability of star networks. Our results may have important implications for environments characterized by ex ante homogeneous agents, e.g., those found in technology and agricultural sectors.
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