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Myopic and farsighted stability in network formation games: an experimental study

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  • Mariya Teteryatnikova

    (National Research University Higher School of Economics
    Vienna University of Economics and Business)

  • James Tremewan

    (University of Auckland)

Abstract

We test the performance of myopic and farsighted stability concepts in a network formation experiment with a stream of payoffs and relatively unstructured link formation process. A subtle treatment variation demonstrates clearly the power of myopic stability concepts in precisely identifying the set of the most stable networks. However, we also find support for the predictions of farsighted concepts of stability, especially those that assume players’ pessimism about the eventual outcome of a deviation. This is the first study to demonstrate that there exist environments where farsighted stability concepts identify empirically stable networks that are not identified by myopic concepts. Thus, myopic stability concepts are not necessarily sufficient to predict all stable outcomes in empirical applications.

Suggested Citation

  • Mariya Teteryatnikova & James Tremewan, 2020. "Myopic and farsighted stability in network formation games: an experimental study," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 69(4), pages 987-1021, June.
    • Handle: RePEc:spr:joecth:v:69:y:2020:i:4:d:10.1007_s00199-019-01200-z
    DOI: 10.1007/s00199-019-01200-z
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    Cited by:

    1. Mariya Teteryatnikova, 2021. "Cautious farsighted stability in network formation games with streams of payoffs," International Journal of Game Theory, Springer;Game Theory Society, vol. 50(4), pages 829-865, December.
    2. de Callatay, Pierre & Mauleon, Ana & Vannetelbosch, Vincent, 2023. "Local Farsightedness in Network Formation," LIDAM Discussion Papers CORE 2023003, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    3. Chenghong Luo & Ana Mauleon & Vincent Vannetelbosch, 2021. "Network formation with myopic and farsighted players," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 71(4), pages 1283-1317, June.
    4. Pierre de Callataÿ & Ana Mauleon & Vincent Vannetelbosch, 2023. "Myopic-farsighted absorbing networks," Theory and Decision, Springer, vol. 94(3), pages 405-422, April.
    5. Sauermann, Jan & Schwaninger, Manuel & Kittel, Bernhard, 2022. "Making and breaking coalitions: Strategic sophistication and prosociality in majority decisions," European Journal of Political Economy, Elsevier, vol. 71(C).
    6. Luo, Chenghong & Mauleon, Ana & Vannetelbosch, Vincent, 2022. "Friendship networks with farsighted agents," LIDAM Discussion Papers CORE 2022021, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).

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    More about this item

    Keywords

    Network formation; Myopic and farsighted stability; Cautious behaviour; Laboratory experiment;
    All these keywords.

    JEL classification:

    • A14 - General Economics and Teaching - - General Economics - - - Sociology of Economics
    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation

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