Are Individuals Profit Maximising in Network Formation? Some Experimental Evidence

Di Cagno, Daniela and Sciubba, Emanuela (2005) Are Individuals Profit Maximising in Network Formation? Some Experimental Evidence. [Working Paper]. DPTEA, LUISS, Roma. p. 29.

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We run a computerised experiment of network formation, where all connections are beneficial and only direct links are costly. The game-theoretic basis for the experiment is the model of Goyal and Joshi (2004)where players simultaneously submit link proposals and a connection is made only when both players involved agree. We provide an analysis both at the macro and the micro level. From a macro perspective, in accordance with the exsisting literature, we find that convergence to the stable network architecture is made problematic by the presence of multi- ple equilibria. At the level of the individual, we estimate the probability of a link through a probit model that includes both best-response and behavioural variables. We find strong evidence that both play a role in network formation.

Item Type:Report / Paper (Working Paper)
Research documents and activity classification:Working Papers > Non-Refereed Working Papers / of national relevance only
Divisions:Department of Business and Management
Uncontrolled Keywords:Network formation. Experiments. Social interaction. Collaudo. Interazione sociale.
MIUR Scientific Area:Area 13 - Economics and Statistics > SECS-P/01 Political Economy
Deposited By:Silvia Capobianchi
Deposited On:18 Jun 2009 08:22
Last Modified:05 Feb 2013 21:41

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