The Strategic Formation of Networks: Experimental Evidence
AbstractWe use a laboratory experiment to explore dynamic network formation in a six-player game where link creation requires mutual consent. The analysis of network outcomes suggests that the process tends to converge to the pairwise-stable (PWS) equilibrium when it exists and not to converge at all when it does not. When multiple PWS equilibria exist, subjects tend to coordinate on the high-payoff one. The analysis at the single choice level indicates that the percentage of myopically rational behavior is generally high. Deviations are more prevalent when actions are reversible, when marginal payoff losses are smaller and when deviations involve excessive links that can be removed unilaterally later on. There is, however, some heterogeneity across subjects.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 8757.
Date of creation: Jan 2012
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Find related papers by JEL classification:
- C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
- C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
- D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
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- NEP-EVO-2012-03-28 (Evolutionary Economics)
- NEP-EXP-2012-03-28 (Experimental Economics)
- NEP-GTH-2012-03-28 (Game Theory)
- NEP-NET-2012-03-28 (Network Economics)
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- KIRCHSTEIGER, Georg & MANTOVANI, Marco & MAULEON, Ana & VANNETELBOSCH, Vincent, 2013.
"Limited farsightedness in network formation,"
CORE Discussion Papers
2013033, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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