In Seach of Stars

Jacob Goeree and Arno Riedl

No 567, 2004 Meeting Papers from Society for Economic Dynamics

Abstract: We study the endogenous formation of networks in a controlled experiment. Subjects derive benefits from being linked to others and incur costs for links they make. The theoretically predicted network has a "star"-type architecture, with "periphery" subjects linking to a unique "center". This asymmetric outcome, in terms of actions and payoffs, does not arise in completely symmetric environments. When benefits and linking costs vary across subjects, however, stars emerge and observed networks are close to efficient. This finding accords with the observation that stars in real life often have uniquely defining characteristics, which alleviates coordination problems and reduces fairness concerns.

Keywords: networks; experiments (search for similar items in EconPapers)
JEL-codes: C72 (search for similar items in EconPapers)
Date: 2004
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed004:567

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