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Myopic or farsighted? An experiment on network formation

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  • KIRCHSTEIGER, Georg

    ()
    (ECARES, Université Libre de Bruxelles, B-1050 Bruxelles, Belgium; CESifo and CEPR)

  • MANTOVANI, Marco

    (Università degli Studi di Milano)

  • MAULEON, Ana

    ()
    (FNRS and CEREC, Facultés Universitaires Saint-Louis, B-1000 Bruxelles, Belgium)

  • VANNETELBOSCH, Vincent

    ()
    (FNRS & Université catholique de Louvain, CORE, B-1348 Louvain-la-Neuve, Belgium)

Abstract

Pairwise stability (Jackson and Wolinsky, 1996) is the standard stability concept in network formation. It assumes myopic behavior of the agents in the sense that they do not forecast how others might react to their actions. Assuming that agents are farsighted, related stability concepts have been proposed. We design a simple network formation experiment to test these theories. Our results provide support for farsighted stability and strongly reject the idea of myopic behavior.

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Bibliographic Info

Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2011007.

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Date of creation: 01 Feb 2011
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Handle: RePEc:cor:louvco:2011007

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Keywords: Experiment; myopic and farsighted stability and network formation;

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  1. Licun Xue, 1998. "Coalitional stability under perfect foresight," Economic Theory, Springer, vol. 11(3), pages 603-627.
  2. Fehr, Ernst & Schmidt, Klaus M., . "A theory of fairness, competition, and cooperation," Chapters in Economics, University of Munich, Department of Economics.
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  4. HERINGS, Jean-Jacques & MAULEON, Ana & ANNETELBOSCH, Vincent J., . "Rationalizability for social environments," CORE Discussion Papers RP -1718, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  5. Kosfeld Michael, 2004. "Economic Networks in the Laboratory: A Survey," Review of Network Economics, De Gruyter, vol. 3(1), pages 1-23, March.
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  8. Goeree, Jacob K. & Riedl, Arno & Ule, Aljaz, 2005. "In Search of Stars: Network Formation among Heterogeneous Agents," IZA Discussion Papers 1754, Institute for the Study of Labor (IZA).
  9. Gilles Grandjean & Ana Mauleon & Vincent Vannetelbosch, 2011. "Connections Among Farsighted Agents," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 13(6), pages 935-955, December.
  10. Herings, P. Jean-Jacques & Mauleon, Ana & Vannetelbosch, Vincent, 2009. "Farsightedly stable networks," Games and Economic Behavior, Elsevier, vol. 67(2), pages 526-541, November.
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  12. Anthony Ziegelmeyer & Katinka Pantz, 2005. "Collaborative Networks in Experimental Triopolies," Papers on Strategic Interaction 2005-38, Max Planck Institute of Economics, Strategic Interaction Group.
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  14. TERCIEUX, Olivier & VANNETELBOSCH, Vincent, 2004. "A characterization of stochastically stable networks," CORE Discussion Papers 2004056, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  15. Watts, Alison, 2001. "A Dynamic Model of Network Formation," Games and Economic Behavior, Elsevier, vol. 34(2), pages 331-341, February.
  16. MAULEON, Ana & VANNETELBOSCH, Vincent, . "Farsightedness and cautiousness in coalition formation games with positive spillovers," CORE Discussion Papers RP -1729, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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  18. Watts, Alison, 2002. "Non-myopic formation of circle networks," Economics Letters, Elsevier, vol. 74(2), pages 277-282, January.
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Cited by:
  1. Egbert, Henrik & Sedlarski, Teodor, 2011. "Exploring Impact: Negative Effects of Social Networks," MPRA Paper 56688, University Library of Munich, Germany.
  2. B. Hoyer, 2013. "Network Disruption and the Common Enemy Effect," Working Papers 12-06, Utrecht School of Economics.
  3. 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.
  4. Boncinelli, Leonardo & Pin, Paolo, 2014. "Efficiency and Stability in a Process of Teams Formation," MPRA Paper 56356, University Library of Munich, Germany.

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