Discussion Paper Details

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Title: Myopic or Farsighted? An Experiment on Network Formation

Author(s): Georg Kirchsteiger, Marco Mantovani, Ana Mauleon and Vincent Vannetelbosch

Publication Date: February 2011

Keyword(s): experiment, myopic and farsighted stability and Network formation

Programme Area(s): Industrial Organization

Abstract: Pairwise stability (Jackson and Wolinsky, 1996) is the standard stability concept in network formation. It assumes myopic behavior of the agents in the sense that they do not forecast how others might react to their actions. Assuming that agents are farsighted, related stability concepts have been proposed. We design a simple network formation experiment to test these theories. Our results provide support for farsighted stability and strongly reject the idea of myopic behavior.

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Bibliographic Reference

Kirchsteiger, G, Mantovani, M, Mauleon, A and Vannetelbosch, V. 2011. 'Myopic or Farsighted? An Experiment on Network Formation'. London, Centre for Economic Policy Research.