In search of stars: network formation among heterogeneous agents

Arbeitspapier

This paper reports the results of a laboratory experiment on network formation among heterogeneous agents. The experimental design extends the basic Bala-Goyal (2000) model of network formation with decay and two-way flow of benefits by allowing for agents with lower linking costs or higher benefits to others. We consider treatments where agents' types are common knowledge and treatments where agents' types are private information. In all treatments, the (efficient) equilibrium network has a star structure. We find that with homogeneous agents, equilibrium predictions fail completely. In contrast, with heterogeneous agents stars frequently occur, often with the high-value or low-cost agent in the center. Stars are not borne but rather develop: in treatments with a high-value agent, the network's centrality, stability, and efficiency all increase over time. Our results suggest that agents' heterogeneity is a major determinant for the predominance of star-like structures in real-life social networks.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IZA Discussion Papers ; No. 1754

Classification and Topics

• Classification: Wirtschaft ; Noncooperative Games ; Design of Experiments: Laboratory, Individual ; Design of Experiments: Laboratory, Group Behavior ; Microeconomic Behavior: Underlying Principles ; Network Formation and Analysis: Theory
• Subject: network formation ; stars ; heterogeneity ; laboratory experiments ; Netzwerk ; Soziales Netzwerk ; Test ; Asymmetrische Information ; Theorie

Contributors, Location and Time

• Event: Geistige Schöpfung
• (who): Goeree, Jacob K. ; Riedl, Arno ; Ule, Aljaz
• Event: Veröffentlichung
• (who): Institute for the Study of Labor (IZA)
• (where): Bonn
• (when): 2005

Further information

• Handle: http://hdl.handle.net/10419/33508
• Last update: 20.09.2024, 8:23 AM CEST