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General Economics (econ.GN)

Tue, 02 May 2023

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1.Cooperation and Cognition in Social Networks

Authors:Edoardo Gallo, Joseph Lee, Yohanes Eko Riyanto, Erwin Wong

Abstract: Social networks can sustain cooperation by amplifying the consequences of a single defection through a cascade of relationship losses. Building on Jackson et al. (2012), we introduce a novel robustness notion to characterize low cognitive complexity (LCC) networks - a subset of equilibrium networks that imposes a minimal cognitive burden to calculate and comprehend the consequences of defection. We test our theory in a laboratory experiment and find that cooperation is higher in equilibrium than in non-equilibrium networks. Within equilibrium networks, LCC networks exhibit higher levels of cooperation than non-LCC networks. Learning is essential for the emergence of equilibrium play.