Integration and diversity
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Integration and diversity Sanjeev Goyal1 · Penélope Hernández2 · Guillem Martínez‑Cánovas2 · Frédéric Moisan3 · Manuel Muñoz‑Herrera4 · Angel Sánchez5 Received: 28 March 2019 / Revised: 26 August 2020 / Accepted: 30 August 2020 © Economic Science Association 2020
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. Keywords Networks · Equilibrium selection · Social coordination · Experiment JEL Classification D85 · D03 · C72 · C92
1 Introduction Predicting which of the many equilibria will be selected is perhaps the most difficult problem in game theory (Camerer 2003) In 2017, in a widely publicized incident in the Netherlands, a coach company Qbuzz refused to interview an immigrant who had applied for a job because he said that he would not shake hands with female clients (due to his religious beliefs). The coach Electronic supplementary material The online version of this article (https://doi.org/10.1007/s1068 3-020-09676-6) contains supplementary material, which is available to authorized users. * Manuel Muñoz‑Herrera [email protected] Extended author information available on the last page of the article
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company felt that the behaviour of the driver went against social norms in the Netherlands (and would probably put off potential customers). This incident brings out the point that individuals may have different rankings over norms—physical contact between a man and woman is the accepted norm in some communities, while it is entirely prohibited in other communities. A relatively common tension also arises in the context of language: members of different communities each prefer their mother tongue to be the common language of communication. Language is a central concern in knowledge based and communication intensive societies. These differences in preferences on norms create the following tension: individuals would like to coordinate on actions with others, but their preferences over these actions may be different.1 This paper studies how individuals choose actions and arrive at norms of coordination in such settings. To clarify the key considerations, we start by defining a social game in which a
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