Myopic or Farsighted? An Experiment on Network Formation
32 Pages Posted: 24 Jun 2011
Date Written: June 24, 2011
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.
Keywords: network formation, experiment, myopic and farsighted stability
JEL Classification: D85, C91, C92
Suggested Citation: Suggested Citation