This paper reports results from a laboratory experiment on network formation among heterogeneous agents. The experimental design extends the Bala-Goyal (2000) model of network formation with decay and two-way flow of benefits by allowing for agents with lower linking costs or higher benefits to others. Furthermore, agents’ types may be common knowledge or private information. In all treatments, the (efficient) equilibrium network has a “star” structure. With homogeneous agents, equilibrium predictions fail completely. In contrast, with heterogeneous agents stars frequently occur, often with the high-value or low-cost agent in the center. Stars are not born but rather develop: with a high-value agent, the network’s centrality, stability, and efficiency all increase over time. Probit estimations based on best-response behaviour and other-regarding preferences are used to analyze individual linking behavior. Our results suggest that heterogeneity is a major determinant for the predominance of star-like structures in real-life social networks.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
file. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Publisher Info
Paper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number
2007.65.
Find related papers by JEL classification: C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
This paper has been announced in the following NEP Reports:
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)