Limited farsightedness in network formation

Georg Kirchsteiger, Marco Mantovani, Ana Mauleon and Vincent Vannetelbosch

Journal of Economic Behavior & Organization, 2016, vol. 128, issue C, 97-120

Abstract: Pairwise stability (Jackson and Wolinsky, 1996) is the standard stability concept in network formation. It is a myopic notion in the sense that it only considers the immediate benefits of the players. A different perspective investigates perfect farsightedness, proposing related stability concepts. We design a simple network formation experiment to test these extreme theories, but find evidence against both of them: both myopically and farsightedly stable networks fail to emerge when they are not immune to limitedly farsighted deviations. The selection among multiple pairwise stable networks (and the performance of farsighted stability) crucially depends on the level of farsightedness needed to sustain them, and not on efficiency or cooperative considerations.

Keywords: Network formation; Experiment; Myopic and farsighted stability (search for similar items in EconPapers)
JEL-codes: C91 C92 D85 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (33)

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Related works:
Working Paper: Limited Farsightedness in Network Formation (2016)
Working Paper: Limited farsightedness in network formation (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:128:y:2016:i:c:p:97-120

DOI: 10.1016/j.jebo.2016.05.016

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