The Strategic Formation of Networks: Experimental Evidence

Juan D. Carrillo and Arya Gaduh

No 8757, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We use a laboratory experiment to explore dynamic network formation in a six-player game where link creation requires mutual consent. The analysis of network outcomes suggests that the process tends to converge to the pairwise-stable (PWS) equilibrium when it exists and not to converge at all when it does not. When multiple PWS equilibria exist, subjects tend to coordinate on the high-payoff one. The analysis at the single choice level indicates that the percentage of myopically rational behavior is generally high. Deviations are more prevalent when actions are reversible, when marginal payoff losses are smaller and when deviations involve excessive links that can be removed unilaterally later on. There is, however, some heterogeneity across subjects.

Keywords: Laboratory experiments; Myopic rationality; Pairwise stable equilibria; Social Networks (search for similar items in EconPapers)
JEL-codes: C73 C92 D85 (search for similar items in EconPapers)
Date: 2012-01
New Economics Papers: this item is included in nep-evo, nep-exp, nep-gth, nep-net and nep-soc
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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