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Integration and diversity
Published online by Cambridge University Press: 14 March 2025
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.
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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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Goyal et al. supplementary material
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