Believe it or not: Experimental Evidence on Sunspot Equilibria with Social Networks

Models with sunspot equilibria have long been a topic of interest among economists. It then became an interesting question to ask whether there is empirical support for their existence. One approach to answer this question is through lab experiments. A growing literature has not only successfully reproduced these equilibria in the lab, but also improved our understanding of the conditions under which they might emerge. We study the importance of information provision, and how it affects convergence dynamics. We run a laboratory experiment in which individuals, connected through a network, directly observe the actions of their neighbors as well as aggregate information. By manipulating both the type of information available and the structure of the network, we show that general information about other players' behavior hinders coordination, while information specifically related to the sunspot enhances it.