A large literature in development economics argues that information about agricultural innovations diffuses through farmers’ social networks. The structure of these network influences the extent and speed of information diffusion. In an artefactual field experiment in rural India we find that subjects form inefficient information-sharing networks and lose 35 percent of payoffs as a result. The game is designed so that the efficient network can be reached if all players choose strategies consistent with self-interest. These strategies are played frequently, but not often enough. Participants also often target the ‘most popular’ player in the network and this causes large efficiency losses in this experiment. Further, in randomly chosen sessions we disclose information about group membership. The networks formed in these sessions have more connections between subjects of the same group, but are not significantly less efficient. Networks play an important role in the diffusion of information. If they are inefficiently structured, policies that affect how individuals interact with each other have the potential to increase welfare.
Stefano Caria, S. and Fafchamps, M. (2016) "Can Indian Farmers Form Efficient Information-Sharing Networks in the Lab?", Ferdi Policy Brief B163, September 2016