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Myopic or Farsighted? An Experiment on Network Formation

  • 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)

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 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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