DP8263 Myopic or Farsighted? An Experiment on Network Formation
|Author(s):||Georg Kirchsteiger, Marco Mantovani, Ana Mauleon, Vincent Vannetelbosch|
|Publication Date:||February 2011|
|Keyword(s):||experiment, myopic and farsighted stability, Network formation|
|JEL(s):||C91, C92, D85|
|Programme Areas:||Industrial Organization|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=8263|
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.