Choi, S., Goyal, S. and Moisan, F.

Connectors and Influencers

CWPE1935

Abstract: The theory of network formation yields sharp predictions on network structure. Existing experiments on network formation generally reject these predictions. These findings raise a question mark about the validity of an economic approach to understanding networks.

The present paper develops a new experimental platform to study network formation. The platform integrates a network visualization tool with interactive asynchronous choices in continuous time.

The platform allows for large groups of up to 100 subjects in the laboratory. The platform is used to test a model of linking formation and efforts. This model predicts that equilibrium networks have a ‘star’ like structure and that individual efforts are highly specialized. Our experiments offer robust evidence in support of these predictions.

JEL Codes: C92 D83 D85 Z13

Author links: Sanjeev Goyal Frederic Moisan

PDF: http://www.econ.cam.ac.uk/research-files/repec/cam/pdf/cwpe1935.pdf