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

A. Alexander Elbittar (), Rodrigo Harrison and Roberto Muñoz

No 331, Documentos de Trabajo from Instituto de Economía. Pontificia Universidad Católica de Chile.

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 payo¤ 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.

Keywords: Networks; Global Games; Cooperative Games; Equilibrium Selection; Experimental economics. (search for similar items in EconPapers)
JEL-codes: C70 C92 D20 D44 D82 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-evo, nep-exp, nep-gth and nep-net
Date: 2008

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Related works:
Working Paper: Network Structure in a Link-formation Game: An Experimental Study (2007)
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Persistent link: http://EconPapers.repec.org/RePEc:ioe:doctra:331

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