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Integration and diversity

Published online by Cambridge University Press:  14 March 2025

Sanjeev Goyal ,
Penélope Hernández ,
Guillem Martínez-Cánovas ,
Frédéric Moisan ,
Manuel Muñoz-Herrera Open the ORCID record for Manuel Muñoz-Herrera [Opens in a new window]  and
Angel Sánchez
Sanjeev Goyal*
Affiliation:
Faculty of Economics and Christ’s College, University of Cambridge, Cambridge, UK
Penélope Hernández*
Affiliation:
Departamento de Análisis Económico, Universitat de València, Valencia, Spain
Guillem Martínez-Cánovas*
Affiliation:
Departamento de Análisis Económico, Universitat de València, Valencia, Spain
Frédéric Moisan*
Affiliation:
EM Lyon Business School, GATE, Lyon, France
Manuel Muñoz-Herrera*
Affiliation:
Social Science Division, New York University Abu Dhabi, Abu Dhabi, United Arab Emirates
Angel Sánchez*
Affiliation:
Departamento de Matemáticas, Universidad Carlos III de Madrid, Getafe, Spain
*
sg472@cam.ac.uk
penelope.hernandez@uv.es
guillem.martinez@uv.es
moisan@em.lyon.com
manumunoz@nyu.edu
anxo@math.uc3m.es
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Abstract

We study a setting where individuals prefer to coordinate with others but they differ on their preferred action. Our interest is in understanding the role of link formation with others in shaping behavior. So we consider the situation in which interactions are exogenous and a situation where individuals choose links that determine the interactions. Theory is permissive in both settings: conformity (on either of the actions) and diversity (with different groups choosing their preferred actions) are both sustainable in equilibrium. We conduct an experiment to understand how link formation affects equilibrium selection. Our experiment reveals the powerful effect of linking on equilibrium selection: with an exogenous complete network, subjects choose to conform on the majority’s preferred action. By contrast, with endogenous linking—irrespective of the costs of linking—subjects always opt for diversity of actions.

Keywords

NetworksEquilibrium selectionSocial coordinationExperiment

JEL classification

D85: Network Formation and Analysis: Theory C92: Laboratory, Group Behavior C72: Noncooperative Games
Type
Original Paper
Information
Experimental Economics , Volume 24 , Issue 2 , June 2021 , pp. 387 - 413
Copyright
Copyright © 2020 Economic Science Association

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Footnotes

Electronic supplementary material The online version of this article (https://doi.org/10.1007/s10683-020-09676-6) contains supplementary material, which is available to authorized users.

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