Three Essays in Experimental and Network Economics

This dissertation consists of the three essays in network and experimental economics. The first essay explores the importance of endogenous bilateral connections and punishment networks in public good settings. I conduct a laboratory experiment that varies the incentive to form links among participants in a traditional Voluntary Contribution Mechanism game. I find that when link benefits are zero very few connections are formed, and very little punishment takes place. When link benefits are positive many links are formed and cooperation levels are increased. In general, we find evidence that participants strategically use the bilateral linking process to avoid punishment and find significant differences in the impacts of the bilateral link formation process when compared with exogenous punishment institutions. The second essay studies heterogeneity in sequential Tullock contests in the form of increased prize valuations and probabilistic entry, in a theoretical and laboratory setting. Building upon a new modelling technique, I generate theoretical hypotheses about the impact of heterogeneity in sequential contests. Specifically, a change in prize valuation or effort cost has the largest impact when the individual with the heterogenous valuation moves earlier in the contest. We then design a laboratory test and find support for theoretical predictions. We also find evidence that overbidding tends to increase as players move later in the contest. Further, we find an interesting behavioral result that we call a Winning Probability heuristic. For final players in sequential contests, many subjects make decisions consistent with choosing a winning probability rather than expected payoff maximization predicted by Nash Equilibrium theory. The final essay adapts a theoretical model commonly used in pricing of goods on a network with consumption complementarities to a setting that deals with telecommuting and flexible work arrangements. I provide an example of how allowing an employee to work from home can impact connectivity among employees and firm profitability. I show that the network of employees, wage structure, and the position of the employee in the network are all important determinants on whether a working from home arrangement is profitable. I then explicitly model how a firm can invest to influence the connectivity of their employees through investments that facilitate connections among employees such as providing an office space, hosting get togethers, or setting up a team chat function for remote workers. I also find that optimal expenditure in facilitating connections has a nonlinear relationship to the cost.