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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.

Suggested Citation

  • Harmsen - van Hout, Marjolein J.W. & Dellaert, Benedict G.C. & Herings, P. Jean-Jacques, 2010. "Behavioral Effects in Individual Decisions of Network Formation: Complexity Reduces Payoff Orientation and Social Preferences," FCN Working Papers 5/2010, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
  • Handle: RePEc:ris:fcnwpa:2010_005
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    References listed on IDEAS

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    More about this item

    Keywords

    network formation; individual decision making; behavioral effects; network complexity; payoff orientation; social preferences; choice experiments; mixed logit;

    JEL classification:

    • A14 - General Economics and Teaching - - General Economics - - - Sociology of Economics
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation

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