We study the behavior of experimental subjects who have to make a sequence of risky investment decisions in the presence of network externalities. Subjects follow a simple heuristic – investing after positive experiences and reducing their propensity to invest after a failure. This result...

This paper uses a laboratory experiment to test the predictions of a dynamic global game designed to capture the self-fulfilling nature of speculative attacks. The game has two stages and a large number of heterogeneously informed agents deciding whether to attack the status quo. In the first...

Existing experimental studies (Cooper, DeJong, Forsythe and Ross, 1993; Shahriar, 2009) have shown that an outside option, when offered to one of the two players who later participate in a battle-of-the-sexes game, makes the equilibrium that favors the same player focal. This focal point arises even...

We study the behavior of experimental subjects who have to make a sequence of risky investment decisions in the presence of network externalities. Subjects follow a simple heuristic – investing after positive experiences and reducing their propensity to invest after a failure. This result...