Strategic formation of collaborative networks

Abstract

We examine behavior in an experimental collaboration game that incorporates endogenous network formation. The environment is modeled as a generalization of the voluntary contributions mechanism. By varying the information structure in a controlled laboratory experiment, we examine the underlying mechanisms of reciprocity that generate emergent patterns in linking and contribution decisions. Providing players more detailed information about the sharing behavior of others drastically increases efficiency, and positively affects a number of other key outcomes. To understand the driving causes of these changes in behavior we develop and estimate a structural model for actions and small network panels and identify how social preferences affect behavior. We find that the treatment reduces altruism but stimulates reciprocity, helping players coordinate to reach mutually beneficial outcomes. In a set of counterfactual simulations, we show that increasing trust in the community would encourage higher average contributions at the cost of mildly increased free-riding. Increasing overall reciprocity greatly increases collaborative behavior when there is limited information but can backfire in the treatment, suggesting that negative reciprocity and punishment can reduce efficiency. The largest returns would come from an intervention that drives players away from negative and toward positive reciprocity.