Edoardo Gallo
Faculty of Economics
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CERF Fellow of Cohort 2024 - 2026
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The role of monetary systems and networks in the emergence of cooperation
Globalization offers unparalleled opportunities to expand human cooperation across large networks of unrelated individuals. Theoretically, permanent social exclusion (ostracism), temporary social exclusion, and monetary exchange are three institutions to incentivise and sustain cooperation. In an experiment, we evaluate their relative performance and interaction in anonymous networks of different sizes. Ostracism results in sparse networks, hindering long-run economic potential. Monetary exchange and temporary social exclusion perform similarly well in small networks. In large networks, however, monetary exchange is the only institution that completely crowds out ostracism, promoting full cooperation on an intact network. In a nutshell, monetary systems outperform social exclusion mechanisms in promoting cooperation in a globalized world.
Contact tracing, quarantine, and financial activity
Contact tracing, quarantine, and financial activity
The emergence of novel COVID-19 variants means that contact tracing and quarantine measures will remain an important part of the pandemic-management toolkit. The aim of this project is to experimentally investigate the impact of these measures on the resumption of economic/financial activity and the spread of the disease. Our design will look at optional and mandatory tracing and quarantine schemes, and compare their relative effectiveness at curbing infection rates and enabling the return to full economic/financial activity.
The project is the first to experimentally study actual behaviour of people under different tracing and quarantining regimes.
Monetary networks
Monetary networks
Recently the developed world has experienced an erosion of norms of cooperation. Partly responsible is a decline in the social networks that used to sustain them. Concurrently, market-based mechanisms and financial institutions replaced the function of networks in several domains, leading many to believe a causal connection exists between these trends. This project aims to investigate experimentally the causal role played by social networks on the development of financial institutions used to sustain cooperation. It will bring closer together the micro literature on networks and cooperation, and the macro-finance literature on decentralized models of money and financial intermediation.
An Experimental Study of Financial Contagion in Networks
An Experimental Study of Financial Contagion in Networks
The 2008 global financial crisis highlighted the crucial role that the network architecture of the financial system plays in determining systemic contagion. The aim of this project is to conduct a series of experiments to investigate how different network structures affect the probability of systemic contagion in experimental asset markets. A particular focus will be on how (i) market participants’ knowledge about the network and (ii) the structure of the trading environment interact with the network structure to cause financial contagion.
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