Experimental Economics

, Volume 9, Issue 3, pp 237–251 | Cite as

A network experiment in continuous time: The influence of link costs

  • Siegfried K. Berninghaus
  • Karl-Martin Ehrhart
  • Marion Ott
Article

Abstract

In recent work on non-cooperative network formation star-shaped networks play an important role. In a particular theoretical model of Bala and Goyal (2000) center-sponsored stars are the only strict Nash networks. In testing this theoretical model, Falk and Kosfeld (2003) do not find experimental evidence that players select the center-sponsored star. Based on a slight modification of Bala and Goyal’s model, we design a network formation experiment in which, depending on link costs, periphery-sponsored stars and the empty network are the only strict Nash networks. We observe that almost all groups not only reach a strict Nash network once but also switch the center player in periphery-sponsored stars several times. The main innovation in our experiment is to use a continuous time framework which we believe to be a more realistic setting to study behavior in network formation situations and which makes coordination on stars much easier than simultaneous strategy adaptation in discrete time.

Keywords

Network formation Nash networks Real-time experiments 

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Copyright information

© Economic Science Association 2006

Authors and Affiliations

  • Siegfried K. Berninghaus
    • 1
  • Karl-Martin Ehrhart
    • 1
  • Marion Ott
    • 1
  1. 1.University of Karlsruhe, Institute WiORKarlsruhe

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