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A network experiment in continuous time: The influence of link costs

Published online by Cambridge University Press:  14 March 2025

Siegfried K. Berninghaus ,
Karl-Martin Ehrhart  and
Marion Ott
Siegfried K. Berninghaus*
Affiliation:
University of Karlsruhe, Institute WiOR, Zirkel 2, Rechenzentrum, D-76131 Karlsruhe
Karl-Martin Ehrhart*
Affiliation:
University of Karlsruhe, Institute WiOR, Zirkel 2, Rechenzentrum, D-76131 Karlsruhe
Marion Ott*
Affiliation:
University of Karlsruhe, Institute WiOR, Zirkel 2, Rechenzentrum, D-76131 Karlsruhe
*
e-mail: berninghaus@wiwi.uni-karlsruhe.de
e-mail: ehrhart@wiwi.uni-karlsruhe.de
e-mail: ott@wiwi.uni-karlsruhe.de
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Abstract

In recent work on non-cooperative network formation star-shaped networks play an important role. In a particular theoretical model of Bala and Goyal (2000) center-sponsored stars are the only strict Nash networks. In testing this theoretical model, Falk and Kosfeld (2003) do not find experimental evidence that players select the center-sponsored star. Based on a slight modification of Bala and Goyal's model, we design a network formation experiment in which, depending on link costs, periphery-sponsored stars and the empty network are the only strict Nash networks. We observe that almost all groups not only reach a strict Nash network once but also switch the center player in periphery-sponsored stars several times. The main innovation in our experiment is to use a continuous time framework which we believe to be a more realistic setting to study behavior in network formation situations and which makes coordination on stars much easier than simultaneous strategy adaptation in discrete time.

Keywords

Network formationNash networksReal-time experiments

JEL classification

D81: Criteria for Decision-Making under Risk and Uncertainty C92: Laboratory, Group Behavior C72: Noncooperative Games

Information

Type
Research Article
Information
Experimental Economics , Volume 9 , Issue 3: Special Issue: Behavioral Economics , September 2006 , pp. 237 - 251
Copyright
Copyright © 2006 Economic Science Association

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Footnotes

Electronic Supplementary Material Supplementary material is available in the online version of this article at http://dx.doi.org/10.1007/s10683-006-9125-1.

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A Network Experiment in Continuous Time: The Influence of Link Costs — Translation of Experimental Instructions —
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