On January 1, 2024, Sharon Harrison, professor and Program Director of Economics and the New Pathways Bridgewater Scholars Program at Barnard College, published new research in the journal Games and Economic Behavior, titled “Believe it or not: Experimental evidence on sunspot equilibria with social networks.”
In this paper, Harrison and her colleague, Pietro Battiston, are interested in sunspot equilibria, which involve the idea that factors that are unrelated to the fundamentals of an economy (e.g., social and psychological phenomena, such as business optimism and consumer expectations) may affect its performance. Economic models with sunspot equilibria have long intrigued economists, and Harrison and Battiston wonder if there is empirical support for the existence of these equilibria.
Harrison and Battiston ran a laboratory experiment in which participants received a sunspot signal and also directly observed the actions of their neighbors, either through a social network structure or more generally. The researchers examined the way this information affected the participants’ choices and behavior. Results indicated that coordination on the sunspot signal increased over time, and messages that subjects received could substantially affect their reliance on the available sunspot. By manipulating both the type of information available to participants and the structure of the network that connected them, Harrison and Battiston found that general information about other players' behavior hindered coordination, while information specifically related to the sunspot enhanced it. By revealing that there are situations in which knowing what your neighbor does can interfere with attempts to coordinate, Harrison and Battiston promote a better understanding of the conditions under which sunspot equilibria may emerge.