Social networks can sustain cooperation by amplifying the consequences of a single defection through a cascade of relationship losses. Building on Jackson et al. (2012), we introduce a novel robustness notion to characterize low cognitive complexity (LCC) networks - a subset of equilibrium networks that imposes a minimal cognitive burden to calculate and comprehend the consequences of defection. We test our theory in a laboratory experiment and find that cooperation is higher in equilibrium than in non-equilibrium networks. Within equilibrium networks, LCC networks exhibit higher levels of cooperation than non-LCC networks. Learning is essential for the emergence of equilibrium play. 

Contact tracing and quarantine programs have been one of the leading Non-Pharmaceutical Interventions against COVID-19. Some governments have relied on mandatory programs, whereas others embrace a voluntary approach. However, there is limited evidence on the relative effectiveness of these different approaches. In an interactive online experiment conducted on 731 subjects representative of the adult US population in terms of sex and region of residence, we find there is a clear ranking. A fully mandatory program is better than an optional one, and an optional system is better than no intervention at all. The ranking is driven by reductions in infections, while economic activity stays unchanged. We also find that political conservatives have higher infections and levels of economic activity, and they are less likely to participate in the contact tracing program. 

In recent years online social networks have become increasingly prominent in political campaigns and, concurrently, several countries have experienced shock election outcomes. This paper proposes a model that links these two phenomena. In our set-up, the process of learning from others on a network is influenced by confirmation bias, i.e. the tendency to ignore contrary evidence and interpret it as consistent with one’s own belief. When agents pay enough attention to themselves, confirmation bias leads to slower learning in any symmetric network, and it increases polarization in society. We identify a subset of agents that become more/less influential with confirmation bias. The socially optimal network structure depends critically on the information available to the social planner. When she cannot observe agents’ beliefs, the optimal network is symmetric, vertex-transitive and has no self-loops. We explore the implications of these results for electoral outcomes and media markets. Confirmation bias increases the likelihood of shock elections, and it pushes fringe media to take a more extreme ideology.

We investigate how the network structure of financial linkages and uncertainty about the location of a shock affect the likelihood of contagion and the formation of prices in a double auction market experiment. Core-periphery networks are highly susceptible to contagion and generate resales of assets that exacerbate financial contagion beyond the mechanical role of network structure. In contrast, contagion is minimal on circle networks and market prices remain stable even in the presence of large shocks. Uncertainty on the location of the shock has little influence. The traders' level of comprehension of the network-driven risk is predictive of their behavior and the likelihood of bankruptcy.