Superstars Need Social Benefits: An Experiment on Network Formation

Tinbergen Institute Discussion Paper 13-112/I

40 Pages Posted: 10 Aug 2013

See all articles by Boris van Leeuwen

Boris van Leeuwen

Tilburg University - Department of Economics

T. J. S. Offerman

University of Amsterdam - Faculty of Economics and Business (FEB); Tinbergen Institute

Arthur J. H. C. Schram

University of Amsterdam - Faculty of Economics and Business (FEB); Tinbergen Institute

Multiple version iconThere are 2 versions of this paper

Date Written: July 19, 2013

Abstract

We investigate contributions to the provision of public goods on a network when efficient provision requires the formation of a star network. We provide a theoretical analysis and study behavior in a controlled laboratory experiment. In a 2x2 design, we examine the effects of group size and the presence of (social) benefits for incoming links. We find that social benefits are highly important. They facilitate convergence to equilibrium networks and enhance the stability and efficiency of the outcome. Moreover, in large groups social benefits encourage the formation of superstars: star networks in which the core contributes more than expected in the stage-game equilibrium. We show that this result is predicted by a repeated game equilibrium.

Keywords: Network formation, networked public goods, peer production, social benefits, open source software

JEL Classification: C91, D85, H41

Suggested Citation

van Leeuwen, Boris and Offerman, T. J. S. and Schram, Arthur J. H. C., Superstars Need Social Benefits: An Experiment on Network Formation (July 19, 2013). Tinbergen Institute Discussion Paper 13-112/I, Available at SSRN: https://ssrn.com/abstract=2307837 or http://dx.doi.org/10.2139/ssrn.2307837

Boris Van Leeuwen (Contact Author)

Tilburg University - Department of Economics ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

T. J. S. Offerman

University of Amsterdam - Faculty of Economics and Business (FEB) ( email )

Roetersstraat 11
Amsterdam, 1018 WB
Netherlands

Tinbergen Institute ( email )

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

Arthur J. H. C. Schram

University of Amsterdam - Faculty of Economics and Business (FEB) ( email )

Roetersstraat 18
CREED
Amsterdam 1018 WB
Netherlands
+31 (0)20 525 4293 (Phone)

HOME PAGE: http://www.fee.uva.nl/creed/PEOPLE/Arthurs.htm

Tinbergen Institute ( email )

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

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