Competition vs. Fairness – Analyzing Structured Networks by Means of User Experiments

We investigate how to ensure efficiency (in the economic sense of the word) in structured networks, with a focus on heterogeneity. A network is structured if the network designer has predefined some relationships between individuals (aka. nodes). Structured networks have turned out to be surprisingly efficient - at least as long as nodes face the same costs and benefits, i.e., are homogeneous [S. Schosser et al., 2006]. However, the homogeneity assumption is unnatural and restrictive. Economic experiments in general (not with a focus on structured networks) suggest that heterogeneity is in the way of efficiency, i.e., reduces the sum of all payoffs. This is because individuals favor outcomes where everybody earns the same. This paper describes behavioral experiments that investigate this issue, i.e., the influence of heterogeneity on efficiency in structured networks. We show that most nodes in structured networks cooperate even if they earn less than others. Our explanation is that - with our design - competition enhances cooperation. This effect is rarely observed with other networks as well as in other, less specific settings where competition is in the way of cooperation. This result is an important step towards establishing networks that yield more tangible payoffs for its nodes.