Heuristic Decision Making in Network Linking
34 Pages Posted: 5 Feb 2015
Date Written: December 1, 2014
Network formation among individuals constitutes an important part of many OR processes, but relatively little is known about how individuals make their linking decisions in networks. This article provides an investigation of heuristic effects in individual linking decisions for network formation in an incentivized lab-experimental setting. Our mixed logit analysis demonstrates that the inherent complexity of the network linking setting causes individuals’ choices to be systematically less guided by payoff but more guided by simpler heuristic decision cues, and even stronger less motivated by the payoff for others. Furthermore, we show that the specific complexity factors value transferability and social tradeoff aggravate the former effect. These heuristic effects have important research and policy implications in areas that involve network formation.
Keywords: network formation, individual decision making, heuristic effects, laboratory experiment, mixed logit
JEL Classification: A14, C25, C91, D85
Suggested Citation: Suggested Citation