Highly flexible neighborhood promotes efficient coordination: Experimental evidence

We experimentally investigate group effort-coordination games where individuals are occasionally offered opportunities to alter their interaction neighborhood (with whom they want to connect and interact). We vary the neighborhood flexibility, or the rate with which such opportunities arise. We find that increasing neighborhood flexibility significantly improves coordination efficiency when players start with a decentralized circle-shaped network, but the improvement is limited if they start with a highly centralized star-shaped network. Neighborhood flexibility improves coordination through facilitating assortative matching among high-effort players. In star-shaped networks, neighborhood flexibility has a side-effect of decentralizing the networks which weakens the central player’s ability in facilitating coordination hence partially offsets the benefit from assortative matching.