In Seach of Stars
AbstractWe study the endogenous formation of networks in a controlled experiment. Subjects derive benefits from being linked to others and incur costs for links they make. The theoretically predicted network has a "star"-type architecture, with "periphery" subjects linking to a unique "center". This asymmetric outcome, in terms of actions and payoffs, does not arise in completely symmetric environments. When benefits and linking costs vary across subjects, however, stars emerge and observed networks are close to efficient. This finding accords with the observation that stars in real life often have uniquely defining characteristics, which alleviates coordination problems and reduces fairness concerns.
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Bibliographic InfoPaper provided by Society for Economic Dynamics in its series 2004 Meeting Papers with number 567.
Date of creation: 2004
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Postal: Society for Economic Dynamics Christian Zimmermann Economic Research Federal Reserve Bank of St. Louis PO Box 442 St. Louis MO 63166-0442 USA
Web page: http://www.EconomicDynamics.org/society.htm
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