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Myopic or Farsighted? An Experiment on Network Formation

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Author Info

  • Marco Mantovani

    (Università degli Studi di Milano and Université Libre de Bruxelles)

  • Georg Kirchsteiger

    (ECARES, Université Libre de Bruxelles, ECORE, CEPR, and CESifo)

  • Ana Mauleon

    (FNRS and CEREC, Facultés universitaires Saint-Louis and FNRS and CORE, Université catholique de Louvain)

  • Vincent Vannetelbosch

    (FNRS and CORE, Université catholique de Louvain)

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 Fondazione Eni Enrico Mattei in its series Working Papers with number 2011.45.

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Date of creation: Jun 2011
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Handle: RePEc:fem:femwpa:2011.45

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Keywords: Network Formation; Experiment; Myopic and Farsighted Stability;

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References

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  1. HERINGS, Jean-Jacques & MAULEON, Ana & VANNETELBOSCH, Vincent, . "Farsightedly stable networks," CORE Discussion Papers RP -2171, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  2. Goeree,Jacob K. & Riedl,Arno & Ule,Aljaz, 2005. "In Search of Stars: Network Formation among Heterogeneous Agents," Research Memorandum 032, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
  3. Anthony Ziegelmeyer & Katinka Pantz, 2005. "Collaborative Networks in Experimental Triopolies," Papers on Strategic Interaction 2005-38, Max Planck Institute of Economics, Strategic Interaction Group.
  4. Ernst Fehr & Klaus M. Schmidt, . "A Theory of Fairness, Competition and Cooperation," IEW - Working Papers 004, Institute for Empirical Research in Economics - University of Zurich.
  5. Matthew O. Jackson & Asher Wolinsky, 1994. "A Strategic Model of Social and Economic Networks," Discussion Papers 1098, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  6. Watts, Alison, 2001. "A Dynamic Model of Network Formation," Games and Economic Behavior, Elsevier, vol. 34(2), pages 331-341, February.
  7. Calvó-Armengol, Antoni & Zenou, Yves, 2003. "Social Networks and Crime Decisions: The Role of Social Structure in Facilitating Delinquent Behaviour," CEPR Discussion Papers 3966, C.E.P.R. Discussion Papers.
  8. Olivier Tercieux & Vincent Vannetelbosch, 2006. "A characterization of stochastically stable networks," International Journal of Game Theory, Springer, vol. 34(3), pages 351-369, October.
  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. Venkatesh Bala & Sanjeev Goyal, 2000. "A Noncooperative Model of Network Formation," Econometrica, Econometric Society, vol. 68(5), pages 1181-1230, September.
  11. Jean-Jacques HERINGS & Ana MAULEON & Vincent J. VANNETELBOSCH, 2001. "Rationalizability for Social Environments," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2001028, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  12. Dutta, Bhaskar & Ghosal, Sayantan & Ray, Debraj, 2005. "Farsighted network formation," Journal of Economic Theory, Elsevier, vol. 122(2), pages 143-164, June.
  13. Armin Falk, Michael Kosfeld, . "It's all about Connections: Evidence on Network Formation," IEW - Working Papers 146, Institute for Empirical Research in Economics - University of Zurich.
  14. Watts, Alison, 2002. "Non-myopic formation of circle networks," Economics Letters, Elsevier, vol. 74(2), pages 277-282, January.
  15. Licun Xue, 1998. "Coalitional stability under perfect foresight," Economic Theory, Springer, vol. 11(3), pages 603-627.
  16. Page Jr. Frank H & Wooders, Myrna & Kamat, Samir, 2003. "Networks and Farsighted Stability," The Warwick Economics Research Paper Series (TWERPS) 689, University of Warwick, Department of Economics.
  17. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer, vol. 10(2), pages 171-178, June.
  18. Dirk Engelmann & Martin Strobel, 2004. "Inequality Aversion, Efficiency, and Maximin Preferences in Simple Distribution Experiments," American Economic Review, American Economic Association, vol. 94(4), pages 857-869, September.
  19. Frank H. Page, Jr. & Myrna H. Wooders, 2006. "Strategic Basins of Attraction, the Path Dominance Core, and Network Formation Games," Vanderbilt University Department of Economics Working Papers 0614, Vanderbilt University Department of Economics.
  20. 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).
  21. Jackson, Matthew O., 1998. "The Evolution of Social and Economic Networks," Working Papers 1044, California Institute of Technology, Division of the Humanities and Social Sciences.
  22. 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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Citations

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Cited by:
  1. B. Hoyer, 2013. "Network Disruption and the Common Enemy Effect," Working Papers 12-06, Utrecht School of Economics.
  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.

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