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Network Structure in a Link-formation Game: An Experimental Study

Author

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  • Alexander Elbittar
  • Rodrigo Harrison

    () (Instituto de Economía. Pontificia Universidad Católica de Chile.)

  • Roberto Muñoz

Abstract

Network formation is frequently modeled using link-formation games and typically present a multiplicity of Nash equilibria. Cooperative refinements - such as strong or coalitional proof Nash equilibria - have been the standard tool used for equilibrium selection in these games. Non-cooperative refinements derived from the theory of global games have shown also that, for a class of payoff functions, multiplicity of equilibria disappears when the game is perturbed by introducing small amounts of incomplete information. We conducted a laboratory study evaluating the predictive power of each of these refinements in an illustrative link-formation game. Compared with cooperative game solutions, the global game approach did significantly better at predicting the strategies played by individuals in the experiment.

Suggested Citation

  • Alexander Elbittar & Rodrigo Harrison & Roberto Muñoz, 2008. "Network Structure in a Link-formation Game: An Experimental Study," Documentos de Trabajo 331, Instituto de Economia. Pontificia Universidad Católica de Chile..
  • Handle: RePEc:ioe:doctra:331
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    References listed on IDEAS

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    14. Rodrigo Harrison & Roberto Muñoz, 2008. "Stability and equilibrium selection in a link formation game," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 37(2), pages 335-345, November.
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    Cited by:

    1. Rodrigo Harrison & Roberto Muñoz, 2008. "Stability and equilibrium selection in a link formation game," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 37(2), pages 335-345, November.

    More about this item

    Keywords

    Networks; global games; cooperative games; equilibrium selection; experimental economics;

    JEL classification:

    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D20 - Microeconomics - - Production and Organizations - - - General
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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