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A network experiment in continuous time: The influence of link costs

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  • Siegfried Berninghaus

    ()

  • Karl-Martin Ehrhart

    ()

  • Marion Ott

    ()

Abstract

In recent work on non-cooperative network formation star-shaped networks play an important role. In a particular theoretical model of Bala and Goyal (2000) center-sponsored stars are the only strict Nash networks. In testing this theoretical model, Falk and Kosfeld (2003) do not find experimental evidence that players select the center-sponsored star. Based on a slight modification of Bala and Goyal’s model, we design a network formation experiment in which, depending on link costs, periphery-sponsored stars and the empty network are the only strict Nash networks. We observe that almost all groups not only reach a strict Nash network once but also switch the center player in periphery-sponsored stars several times. The main innovation in our experiment is to use a continuous time framework which we believe to be a more realistic setting to study behavior in network formation situations and which makes coordination on stars much easier than simultaneous strategy adaptation in discrete time. Copyright Economic Science Association 2006

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Bibliographic Info

Article provided by Springer in its journal Experimental Economics.

Volume (Year): 9 (2006)
Issue (Month): 3 (September)
Pages: 237-251

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Handle: RePEc:kap:expeco:v:9:y:2006:i:3:p:237-251

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Web page: http://www.springerlink.com/link.asp?id=102888

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Keywords: Network formation; Nash networks; Real-time experiments;

References

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  1. Siegfried Berninghaus & Karl-Martin Ehrhart & Claudia Keser, 1999. "Continuous-Time Strategy Selection in Linear Population Games," Experimental Economics, Springer, vol. 2(1), pages 41-57, August.
  2. Falk, Armin & Kosfeld, Michael, 2003. "It's all about Connections: Evidence on Network Formation," IZA Discussion Papers 777, Institute for the Study of Labor (IZA).
  3. Kosfeld Michael, 2004. "Economic Networks in the Laboratory: A Survey," Review of Network Economics, De Gruyter, vol. 3(1), pages 1-23, March.
  4. repec:rne:rneart:v:3:y:2004:i:1:p:19-41 is not listed on IDEAS
  5. Chmura, T. & Pitz, T., 2006. "Successful strategies in repeated minority games," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 363(2), pages 477-480.
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Cited by:
  1. Charness, Gary & Feri, Francesco & Meléndez-Jiménez, Miguel A & Sutter, Matthias, 2013. "Experimental Games on Networks: Underpinnings of Behavior andEquilibrium Selection," University of California at Santa Barbara, Economics Working Paper Series qt6m0584qv, Department of Economics, UC Santa Barbara.
  2. Charness, Gary & Feri, Francesco & Meléndez-Jiménez, Miguel A. & Sutter, Matthias, 2012. "Equilibrium Selection in Experimental Games on Networks," University of California at Santa Barbara, Economics Working Paper Series qt51v6w9hd, Department of Economics, UC Santa Barbara.
  3. Doğan, Gönül & van Assen, Marcel & Potters, Jan, 2013. "The effect of link costs on simple buyer–seller networks," Games and Economic Behavior, Elsevier, vol. 77(1), pages 229-246.
  4. Boris van Leeuwen & Theo Offerman & Arthur Schram, 2013. "Superstars Need Social Benefits: An Experiment on Network Formation," Tinbergen Institute Discussion Papers 13-112/I, Tinbergen Institute.
  5. Harmsen - van Hout, Marjolein J.W. & Dellaert, Benedict G.C. & Herings, P. Jean-Jacques, 2010. "Behavioral Effects in Individual Decisions of Network Formation: Complexity Reduces Payoff Orientation and Social Preferences," FCN Working Papers 5/2010, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
  6. Michele Bernasconi & Matteo Galizzi, 2010. "Network formation in repeated interactions: experimental evidence on dynamic behaviour," Mind and Society: Cognitive Studies in Economics and Social Sciences, Fondazione Rosselli, vol. 9(2), pages 193-228, December.
  7. Bigoni, Maria & Casari, Marco & Skrzypacz, Andrzej & Spagnolo, Giancarlo, 2011. "Time Horizon and Cooperation in Continuous Time," Research Papers 2088, Stanford University, Graduate School of Business.
  8. Tomohiro Hayashida & Ichiro Nishizaki & Rika Kambara, 2014. "Simulation Analysis for Network Formulation," Computational Economics, Society for Computational Economics, vol. 43(3), pages 371-394, March.

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