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In search of stars: Network formation among heterogeneous agents


Goeree, Jacob K; Riedl, Arno; Ule, Aljaž (2009). In search of stars: Network formation among heterogeneous agents. Games and Economic Behavior, 67(2):445-466.

Abstract

This paper reports results from a laboratory experiment on network formation among heterogeneous agents. The experimental design extends the Bala-Goyal (2000) model of network formation with decay and two-way flow of benefits by introducing agents with lower linking costs or higher benefits to others. Furthermore, agents' types may be common knowledge or private information. In all treatments, the (efficient) equilibrium network has a "star" structure. While equilibrium predictions fail completely with homogeneous agents, star networks frequently occur with heterogeneous agents. Stars are not born but rather develop:
with a high-value agent, the network's centrality, stability, and efficiency all increase over time. A structural econometric model based on best response dynamics and other-regarding preferences is used to analyze individual linking behavior. Maximum-likelihood estimates
of the underlying structural parameters, obtained by pooling data from several treatments, allow us to explain the main treatment effects.

Abstract

This paper reports results from a laboratory experiment on network formation among heterogeneous agents. The experimental design extends the Bala-Goyal (2000) model of network formation with decay and two-way flow of benefits by introducing agents with lower linking costs or higher benefits to others. Furthermore, agents' types may be common knowledge or private information. In all treatments, the (efficient) equilibrium network has a "star" structure. While equilibrium predictions fail completely with homogeneous agents, star networks frequently occur with heterogeneous agents. Stars are not born but rather develop:
with a high-value agent, the network's centrality, stability, and efficiency all increase over time. A structural econometric model based on best response dynamics and other-regarding preferences is used to analyze individual linking behavior. Maximum-likelihood estimates
of the underlying structural parameters, obtained by pooling data from several treatments, allow us to explain the main treatment effects.

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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Economics
Dewey Decimal Classification:330 Economics
Language:English
Date:November 2009
Deposited On:19 Jan 2010 09:24
Last Modified:05 Apr 2016 13:34
Publisher:Elsevier
ISSN:0899-8256
Publisher DOI:https://doi.org/10.1016/j.geb.2008.12.005
Official URL:http://dx.doi.org/10.1016/j.geb.2008.12.005

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