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Myopic or farsighted? An experiment on network formation

  • KIRCHSTEIGER, Georg

    ()

    (ECARES, Université Libre de Bruxelles, B-1050 Bruxelles, Belgium; CESifo and CEPR)

  • MANTOVANI, Marco

    (Università degli Studi di Milano)

  • MAULEON, Ana

    ()

    (FNRS and CEREC, Facultés Universitaires Saint-Louis, B-1000 Bruxelles, Belgium)

  • VANNETELBOSCH, Vincent

    ()

    (FNRS & Université catholique de Louvain, CORE, B-1348 Louvain-la-Neuve, Belgium)

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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Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2011007.

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Date of creation: 01 Feb 2011
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Handle: RePEc:cor:louvco:2011007
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