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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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  1. Matthew O. Jackson & Asher Wolinsky, 1995. "A Strategic Model of Social and Economic Networks," Discussion Papers 1098R, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  2. Watts, Alison, 2002. "Non-myopic formation of circle networks," Economics Letters, Elsevier, vol. 74(2), pages 277-282, January.
  3. Frank H. Page Jr. & Myrna H. Wooders & Samir Kamat, 2002. "Networks and Farsighted Stability," Computing in Economics and Finance 2002 370, Society for Computational Economics.
  4. Jean-Jacques, HERINGS & Ana, MAULEON & Vincent, VANNETELBOSCH, 2006. "Farsightedly stable networks," Discussion Papers (ECON - Département des Sciences Economiques) 2006046, Université catholique de Louvain, Département des Sciences Economiques.
  5. TERCIEUX, Olivier & VANNETELBOSCH, Vincent, . "A characterization of stochastically stable networks," CORE Discussion Papers RP -1877, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  6. Goeree, Jacob K. & Riedl, Arno & Ule, Aljaz, 2005. "In Search of Stars: Network Formation among Heterogeneous Agents," IZA Discussion Papers 1754, Institute for the Study of Labor (IZA).
  7. 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.
  8. Engelmann Dirk & Strobel Martin, 2002. "Inequality Aversion, Efficiency, and Maximin Preferences in Simple Distribution Experiments," Research Memorandum 015, Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT).
  9. Fehr, Ernst & Schmidt, Klaus M., 1999. "A theory of fairness, competition, and cooperation," Munich Reprints in Economics 20650, University of Munich, Department of Economics.
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  11. Herings, P. Jean-Jacques & Mauleon, Ana & Vannetelbosch, Vincent J., 2004. "Rationalizability for social environments," Games and Economic Behavior, Elsevier, vol. 49(1), pages 135-156, October.
  12. Bhaskar Dutta & Sayantan Ghosal & Debraj Ray, 2004. "Farsighted Network Formation," Working papers 122, Centre for Development Economics, Delhi School of Economics.
  13. 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.
  14. de Martí, Joan & Zenou, Yves, 2009. "Social Networks," IZA Discussion Papers 4621, Institute for the Study of Labor (IZA).
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  16. 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).
  17. Kosfeld Michael, 2004. "Economic Networks in the Laboratory: A Survey," Review of Network Economics, De Gruyter, vol. 3(1), pages 1-23, March.
  18. Licun Xue, 1998. "Coalitional stability under perfect foresight," Economic Theory, Springer, vol. 11(3), pages 603-627.
  19. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer, vol. 10(2), pages 171-178, June.
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  22. Venkatesh Bala & Sanjeev Goyal, 2000. "A Noncooperative Model of Network Formation," Econometrica, Econometric Society, vol. 68(5), pages 1181-1230, September.
  23. Watts, Alison, 2001. "A Dynamic Model of Network Formation," Games and Economic Behavior, Elsevier, vol. 34(2), pages 331-341, February.
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