American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Experimentation in Networks
American Economic Review
(pp. 2940–80)
Abstract
We propose a model of strategic experimentation on social networks in which forward-looking agents learn from their own and neighbors' successes. In equilibrium, private discovery is followed by social diffusion. Social learning crowds out own experimentation, so total information decreases with network density; we determine density thresholds below which agents' asymptotic learning is perfect. By contrast, agent welfare is single peaked in network density and achieves a second-best benchmark level at intermediate levels that strike a balance between discovery and diffusion.Citation
Board, Simon, and Moritz Meyer-ter-Vehn. 2024. "Experimentation in Networks." American Economic Review 114 (9): 2940–80. DOI: 10.1257/aer.20230233Additional Materials
JEL Classification
- D82 Asymmetric and Private Information; Mechanism Design
- D83 Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
- D86 Economics of Contract: Theory
- O31 Innovation and Invention: Processes and Incentives
- O33 Technological Change: Choices and Consequences; Diffusion Processes
- Z13 Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification