Abstract
We propose a simple behavioral model to analyze situations where (1) a group of agents repeatedly plays a public goods game within a network structure and (2) each agent only observes the past behavior of her neighbors, but is affected by the decisions of the whole group. The model assumes that agents are imperfect conditional cooperators, that they infer unobserved contributions assuming imperfect conditional cooperation by others, and that they have some degree of bounded rationality. We show that our model approximates quite accurately regularities derived from public goods game experiments.
Highlights
A public goods game is an example of an economic situation in which individual and collective interests are not aligned
If we focus on the specific case of the star network, we note that our model predicts a peculiar “oscillating” dynamics due to the presence of a central player and a group of peripheral players: contributions decrease over time, the slope varies from one period to another due to the asymmetric informational regime of the center and the spokes
This paper provides a new application for decay in networks
Summary
A public goods game is an example of an economic situation in which individual and collective interests are not aligned. The main finding in the experimental analysis of network structures is that contributions are lower in incomplete networks, and some incomplete networks (the star) significantly outperform others (the circle or the line) Both the Nash prediction and the conditional cooperation logic described above are unable to explain these differences across networks. By introducing two additional behavioral assumptions (we consider that players only react to the most recent experience and that they have a limited level of rationality) we keep the model purposely simple and stop its recursive nature.1 This simple formulation is enough to reveal a connection between imperfect conditional cooperation and the presence of decay, one of the main ingredients in some influential models of network formation (e.g., Jackson and Wolinsky 1996, or Bala and Goyal 2000)..
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Free) 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
