Superstars Need Social Benefits: An Experiment on Network Formation

49 Pages Posted: 9 Jan 2015

See all articles by Arthur J. H. C. Schram

Arthur J. H. C. Schram

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

Boris van Leeuwen

Tilburg University - Department of Economics

Theo Offerman

University of Amsterdam - Faculty of Economics & Econometrics (FEE)

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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 is 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

Schram, Arthur J. H. C. and van Leeuwen, Boris and Offerman, Theo, Superstars Need Social Benefits: An Experiment on Network Formation (July 19, 2013). Available at SSRN: https://ssrn.com/abstract=2547388 or http://dx.doi.org/10.2139/ssrn.2547388

Arthur J. H. C. Schram (Contact Author)

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

Boris Van Leeuwen

Tilburg University - Department of Economics ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Theo Offerman

University of Amsterdam - Faculty of Economics & Econometrics (FEE) ( email )

Roetersstraat 11
Amsterdam, 1018 WB
Netherlands
+31 20 525 4294 (Phone)
+31 20 525 5283 (Fax)

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