Network formation in repeated interactions: experimental evidence on dynamic behaviour

Abstract

Here, we present some experiments of non-cooperative games of network formation based on Bala and Goyal (Econometrica 68:1181–1229, 2000). We have looked at the one-way and the two-way flow models, each for high and low link costs. The models come up with both multiple equilibria and coordination problems. We conducted the experiments under various conditions which allowed for repeated interactions between subjects. We found that coordination on non-empty Strict Nash equilibria was not an easy task to achieve, even in the one-way model where the Strict Nash equilibria are wheels. We found some evidence of convergence to equilibrium networks through learning dynamics, while we found no effect of salient labels to help coordination. The evidence on learning behavior provides support for subjects that were choosing strategies in line with various learning rules, principally Reinforcement and Fictitious Play.