Heuristic Decision Making in Network Linking

34 Pages Posted: 5 Feb 2015

See all articles by Marjolein J. W. Harmsen - van Hout

Marjolein J. W. Harmsen - van Hout

Lehrstuhl für Wirtschaftswissenschaften, insb. Energieökonomik; Institute for Future Energy Consumer Needs and Behavior (FCN); E.ON Energy Research Center; RWTH Aachen

Benedict G. C. Dellaert

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE); Erasmus Research Institute of Management (ERIM)

P. Jean-Jacques Herings

Maastricht University

Date Written: December 1, 2014

Abstract

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

Harmsen - van Hout, Marjolein J. W. and Dellaert, Benedict G. C. and Herings, P. Jean-Jacques, Heuristic Decision Making in Network Linking (December 1, 2014). Netspar Discussion Paper No. 12/2014-060. Available at SSRN: https://ssrn.com/abstract=2560739 or http://dx.doi.org/10.2139/ssrn.2560739

Marjolein J. W. Harmsen - van Hout

Lehrstuhl für Wirtschaftswissenschaften, insb. Energieökonomik; Institute for Future Energy Consumer Needs and Behavior (FCN); E.ON Energy Research Center; RWTH Aachen ( email )

Aachen
Germany

HOME PAGE: http://www.eonerc.rwth-aachen.de/aw/cms/website/themen/~shg/fcn/lang/en/

Benedict G. C. Dellaert (Contact Author)

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )

P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands

Erasmus Research Institute of Management (ERIM) ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands

P. Jean-Jacques Herings

Maastricht University ( email )

Department of Economics
P.O. Box 616
6200 MD Maastricht
Netherlands
+31 43 3883636 (Phone)
+31 43 3884878 (Fax)

HOME PAGE: http://www.personeel.unimaas.nl/p.herings/herings.htm

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