EDOARDO GALLO



Associate Professor | University of Cambridge


Main Research Papers

Efficiency and equilibrium in network games: An experiment (with C. Yan). The Review of Economics and Statistics, forthcoming.

The tension between efficiency and equilibrium is a central feature of economic systems. In many contexts, social networks mediate this trade-off: an individual's network position determines equilibrium play, and social relations allow coordination on an efficient norm. We examine this trade-off in a network game with a unique Nash equilibrium, but such that subjects can achieve a higher payoff by following a "collaborative norm". Subjects establish and maintain a collaborative norm in the circle, but the norm weakens with the introduction of one hub connected to everyone in the wheel. In complex and asymmetric networks of 15 and 21 nodes, the norm disappears and subjects' play converges to Nash on every node. We provide evidence that subjects base their decisions on their degree, rather than the overall network structure.

Communication networks in markets. European Economic Review, 129, October 2020, 103545

This paper proposes and tests experimentally a dynamic model of bargaining to analyze decentralized markets where buyers and sellers obtain information about past deals through their social network. There is a unique equilibrium in which every individual obtains the same outcome independent of their network position, and this outcome depends on the peripheral (least connected) individuals in the network. The main testable predictions are that networks with high density and/or low variability in the number of connections across individuals allow their members to obtain a better deal. These predictions are tested in a lab experiment through 4 treatments that vary the network that subjects are assigned to. The results of the experiment lend support to the theoretical predictions. Subjects converge to an outcome that is independent of their network position, and they fare better if they are assigned to a network that is dense and/or has low variability in number of connections across members.

Strong links promote the emergence of cooperative elites (with Y.E. Riyanto, T. Teh and N. Roy). Scientific Reports (Nature) 9, Article number: 10857, 2019.

The maintenance of cooperative behavior is fundamental for the prosperity of human societies. Empirical studies show that high cooperation is frequently associated with the presence of strong social ties, but they are silent on whether a causal mechanism exists, how it operates, and what features of the social environment are conducive to its emergence. Here we show experimentally that strong ties increase cooperation and welfare by enabling the emergence of a close-knit and strongly bound cooperative elite. Crucially, this cooperative elite is more prevalent in social environments characterized by a large payoff difference between weak and strong ties, and no gradation in the process of strengthening a tie. These features allow cooperative individuals to adopt an all or nothing strategy to tie strengthening based on the well-known mechanism of direct reciprocity: participants become very selective by forming strong ties only with other cooperative individuals and severing ties with everyone else. Once formed, these strong ties are persistent and enhance cooperation. A dichotomous society emerges with cooperators prospering in a close-knit, strongly bound elite, and defectors earning low payoffs in a weakly connected periphery. Methodologically, our set-up provides a framework to investigate the role of the strength of ties in an experimental setting.

Whatever it takes to win: Rivalry increases unethical behavior (with G. Kilduff, A. Galinsky, and J. J. Reade). Academy of Management Journal, 59 (5), 1508-1534, 2016.

Media Coverage: Financial Times, USA Today, NYMag.com, Entrepreneur, LSE Business Review

This research investigates the link between rivalry and unethical behavior. We propose that people will be more likely to engage in unethical behavior when competing against their rivals than when competing against non-rival competitors. Across an archival study and a series of experiments, we found that rivalry was associated with increased unsporting behavior, use of deception, and willingness to employ unethical negotiation tactics. We also explore the psychological underpinnings of rivalry in order to illuminate how it differs from general competition and why it increases unethical behavior. The data reveal a serial mediation pathway whereby rivalry heightens the psychological stakes of competition (by increasing actors’ contingency of self-worth and status concerns), which leads to the adoption of a stronger performance-approach orientation, which then increases unethical behavior. These findings highlight the importance of rivalry as a widespread, powerful, yet largely unstudied phenomenon with significant organizational implications. They also help to inform when and why unethical behavior occurs within organizations, and demonstrate that the effects of competition are dependent upon relationships and prior interactions between actors.

Network cognition (with R. Dessi and S. Goyal). Journal of Economic Behavior & Organization, 123, 78-96, 2016.

We study individual ability to memorize and recall information about friendship networks using a combination of experiments and survey-based data. In the experiment subjects are shown a network, in which their location is exogenously assigned, and they are then asked questions about the network after it disappears. We find that subjects exhibit three main cognitive biases: (i) they underestimate the mean degree compared to the actual network; (ii) they overestimate the number of rare degrees; (iii) they underestimate the number of frequent degrees. We then analyze survey data from two ‘real’ friendship networks from a Silicon Valley firm and from a University Research Center. We find, somewhat remarkably, that individuals in these real networks also exhibit these biases.

The effects of reputational and social knowledge on cooperation (with C. Yan). Proceedings of the National Academy of Sciences, 112 (12), 3647-3652, 2015.

Media Coverage: ScienceDaily, Phys.org, Tendencias21, Nectunt blog, Cambridge News

The emergence and sustenance of cooperative behavior is fundamental for a society to thrive. Recent experimental studies have shown that cooperation increases in dynamic networks in which subjects can choose their partners. However, these studies did not vary reputational knowledge, or what subjects know about other’s past actions, which has long been recognized as an important factor in supporting cooperation. They also did not give subjects access to global social knowledge, or information on who is connected to whom in the group. As a result, it remained unknown how reputational and social knowledge foster cooperative behavior in dynamic networks both independently and by complementing each other. In an experimental setting, we show that global reputational knowledge is crucial to sustaining a high level of cooperation and welfare. Cooperation is associated with the emergence of dense and clustered networks with highly cooperative hubs. Global social knowledge has no effect on the aggregate level of cooperation. A community analysis shows that the addition of global social knowledge to global reputational knowledge affects the distribution of cooperative activity: cooperators form a separate community that achieves a higher cooperation level than the community of defectors. Members of the community of cooperators achieve a higher payoff from interactions within the community than members of the less cooperative community.

Social learning by chit-chat. Journal of Economic Theory, 153, 313-343, 2014.

Individuals learn by chit-chatting with others as a by-product of their online and offline activities. Social plugins are an example in the online context: they embed information from a friend, acquaintance or even a stranger on a web page and the information is usually independent of the content of the web page. We formulate a novel framework to investigate how the speed of learning by chit-chat depends on the structure of the environment. A network represents the environment that individuals navigate to interact with each other. We derive an exact formula to compute how the expected time between meetings depends on the underlying network structure and we use this quantity to investigate the speed of learning in the society. Comparative statics show that the speed of learning is sensitive to a mean-preserving spread of the degree distribution (MPS). Specifically, if the number of individuals is low (high), then a MPS of the network increases (decreases) the speed of learning. The speed of learning is the same for all regular networks independent of network connectivity. An extension explores the effectiveness of one agent, the influencer, at influencing the learning process.

Punishing the foreigner: Implicit discrimination in the Premier League based on oppositional identity (with T. Grund and J. J. Reade). Oxford Bulletin of Economics and Statistics, 75 (1), 136-156, 2013.

Media Coverage: Guardian, International Business Times, The Voice, ABC Radio, BBC Radio (audio), Economy, Weekendavisen (in Danish).

We present the first empirical study to reveal the presence of implicit discrimination in a non-experimental setting. By using a large dataset of in-match data in the English Premier League, we show that white referees award significantly more yellow cards against non-white players of oppositional identity. We argue that this is the result of implicit discrimination by showing that this discriminatory behaviour: (i) increases in how rushed the referee is before making a decision, and (ii) it increases in the level of ambiguity of the decision. The variation in (i) and (ii) cannot be explained by any form of conscious discrimination such as taste-based or statistical discrimination. Moreover, we show that oppositional identity players do not differ in their behaviour from other players along several dimensions related to aggressiveness and style of play providing further evidence that this is not statistical discrimination.

Small world networks with segregation patterns and brokers. Review of Network Economics, 11 (3), Article 7, 2012.

Individuals' cognitive knowledge of their social networks is affected by systematic biases. This paper investigates the role of the mean degree bias, i.e. the tendency to underestimate the number of connections of others, in determining the structure of stable networks. It develops a strategic network formation model where agents have heterogeneous knowledge of the network: cognizant agents know the whole network, while ignorant ones are less knowledgeable and biased. For a broad range of parameters, all cognitively stable (CS) networks are small world networks with segregation patterns and brokers. There are also some CS networks with one hub.

Other Research Papers

Exploring Cybercrime Disruption through Laboratory Experiments (with L. Sebagh, J. Lusthaus, F. Varese, and S. Sirur). Proceedings of the Workshop on Attackers and Cybercrime Operations (WACCO), September 2021.

A network-based asymmetric Nash bargaining solution. Proceedings of the Workshop in Internet and Network Economics (WINE 2008), Lecture Notes in Computer Science edited by C. Papadimitriou and S. Zhang, Springer Berlin Heidelberg, New York, 2008.

Team Performance Between Change and Stability: The Case of the Italian Serie A with F. Montanari and G. Silvestri, Journal of Sport Management, 22 (6), 701-716, 2008.

The Secular Evolution of Disk-Planet and Ring-Satellite Systems with J. M. Hahn, Bulletin of the American Astronomical Society, 34 (892), 2002.

Book Contributions and Dissertations

Networks in the laboratory (with S. Choi and S. Kariv) in The Oxford Handbook on the Economics of Networks, edited by Y. Bramoulle, A. Galeotti, and B. Rogers, Oxford University Press, May 2016.

Essays in the economics of networks. D.Phil. dissertation, 2010.

Small worlds, hubs and structural holes: Network formation with players with heterogeneous information. M.Phil. dissertation, 2007.

An X-ray Study of the CVs in NGC 6397. A.B dissertation, 2004.

Calcio - An Italian Religion in "Let's Go Italy 2005," pp. 76, edited by A. Harper. St. Martin's Press, New York, 2005.

El Salvador, Southern Honduras, and Northern Nicaragua sections in "Let's Go Central America 2005," edited by M. S. Zoninsein. St. Martin's Press, New York, 2005.

Other Writings

La crisi del pallone. Ticonzero, 83, 2008.

This entry was a commended finalist in the Economics Network Student Essay Competition, 2008.

A network perspective on leadership. Highly commended finalist, Oxford Leadership Prize, 2006.

Chiacchiere e fatti: un'analisi dello scandalo calciopoli. Ticonzero, 67, 2006.

Humans in Space: Is It Worth It? Harvard Science Review, 18 (2), 48, 2004.

Brand New Worlds: The Search for Other Earths. Harvard Science Review, 17 (2), 74, 2003.

c=0: Halting the Fastest Thing in the Universe. Harvard Science Review, 16 (2), 48, 2002.

SETI: The Dream of a New Era. Harvard Science Review, 16 (2), 48, 2002.