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Games 2018, 9(4), 89; https://doi.org/10.3390/g9040089

Determinants of Equilibrium Selection in Network Formation: An Experiment

1
Faculty of Business Administration and Economics, Paderborn University, 33098 Paderborn, Germany
2
School of Economics, Utrecht University, 3584 EC Utrecht, The Netherlands
*
Author to whom correspondence should be addressed.
Received: 25 September 2018 / Revised: 24 October 2018 / Accepted: 29 October 2018 / Published: 2 November 2018
(This article belongs to the Special Issue Games on Networks: From Theory to Experiments)
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Abstract

Theoretical models on network formation focus mostly on the stability and efficiency of equilibria, but they cannot deliver an understanding of why specific equilibrium networks are selected or whether they are all actually reachable from any starting network. To study factors affecting equilibrium selection, we designed a network formation experiment with multiple equilibria, which can be categorized in terms of the demand on players’ farsightedness and robustness to errors. In a second scenario, we increase the need for farsighted behavior by players, as well as the perceived riskiness of equilibria by adding a stage in which the network is disrupted. This setting allows us to analyze the interplay between the need for farsightedness and perceived risk of errors and its effect on network formation and equilibrium selection. View Full-Text
Keywords: network disruption; experiment; network formation; non-cooperative network games network disruption; experiment; network formation; non-cooperative network games
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Hoyer, B.; Rosenkranz, S. Determinants of Equilibrium Selection in Network Formation: An Experiment. Games 2018, 9, 89.

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