Munich Personal RePEc Archive

Network Perception in Network Games

Ruiz Palazuelos, Sofía (2021): Network Perception in Network Games.

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People form cognitive maps about their networks from the information they have −mental representations of who is connected with whom in the network they are embedded in (Krackhardt, 1987). The aim of this paper is twofold. First, we develop a model of how people form mental representations about the network from the (incomplete) information they have. We relate them with notions of equivalence among nodes and identify a cognitive bias towards asymmetric network structures. We then explore the incidence that players’ network perception has on their equilibrium behavior and payoffs in the induced Bayesian Games. A general condition for equilibrium existence under different setups of incomplete network information is derived. Such a condition uncovers the relevance of the order of the automorphism group of the cognitive networks as a main driver of behavior and welfare.

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