Endogenous network formation in local public goods: An experimental analysis

Ying Chen, Tom Lane and Stuart McDonald

Games and Economic Behavior, 2025, vol. 150, issue C, 198-214

Abstract: We experimentally explore public good production levels and the endogenous formation of network structures to facilitate output sharing among agents with heterogeneous production costs and consumption valuations. Results corroborate the key theoretical insights of Kinateder and Merlino (2017) characterizing how agents form core-periphery networks. However, subjects often produce more and form denser networks than predicted, which sometimes reduces efficiency. There is some tendency for behaviour to converge towards the theoretical equilibrium over repeated play. Our results help us understand the emergence of the law of the few in real-world networks, and suggest it is driven by endogenous sorting of heterogeneous agents.

Keywords: Local public goods; Network formation; Experiment; Heterogeneity (search for similar items in EconPapers)
JEL-codes: C92 D85 H41 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:gamebe:v:150:y:2025:i:c:p:198-214

DOI: 10.1016/j.geb.2024.10.004

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