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Behavioral Effects in Individual Decisions of Network Formation: Complexity Reduces Payoff Orientation and Social Preferences

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  • Harmsen - van Hout, Marjolein J.W.

    ()
    (E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN))

  • Dellaert, Benedict G.C.

    ()
    (Department of Business Economics / Marketing Section, Erasmus School of Economics, Erasmus University Rotterdam)

  • Herings, P. Jean-Jacques

    ()
    (Department of Economics, School of Business and Economics, Maastricht University)

Abstract

Network formation constitutes an important part of many social and economic processes, but relatively little is known about how individuals make their linking decisions in networks. This article provides an experimental investigation of behavioral effects in individual decisions of network formation. Our findings demonstrate that the inherent complexity of the network setting makes individuals’ choices systematically less payoff-guided and also strongly reduces their social orientation. Furthermore, we show that specific network complexity features aggravate the former effect. These behavioral effects have important implications for researchers and managers working in areas that involve network formation.

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Bibliographic Info

Paper provided by E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN) in its series FCN Working Papers with number 5/2010.

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Length: 36 pages
Date of creation: May 2010
Date of revision:
Handle: RePEc:ris:fcnwpa:2010_005

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Web page: http://www.eonerc.rwth-aachen.de/fcn
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Keywords: network formation; individual decision making; behavioral effects; network complexity; payoff orientation; social preferences; choice experiments; mixed logit;

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