NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Margherita Comola

Paris School of Economics and
Université Paris 1 Panthéon-Sorbonne
Maison des Sciences Économiques
106-112 Boulevard de l'Hôpital
75647 Paris Cedex 13, France

E-Mail: margherita.comola@psemail.eu
Institutional Affiliation: Paris School of Economics

NBER Working Papers and Publications

November 2015An Experimental Study of Decentralized Link Formation with Competition
with Marcel Fafchamps: w21758
We design a laboratory experiment to investigate bilateral link formation in a setting where payoffs are pair-specific. Our link formation rule is decentralized and players can make link offers and counter-offers, as in a Beckerian marriage market. The game is designed in such a way that a stable equilibrium configuration exists and does not depend on conditions such as initial configuration or order of move. We test whether the theoretical equilibrium is obtained under experimental conditions, and which individual motivations and decision-making techniques lead players to depart from myopic best response. We find that players are remarkably good at attaining a stable equilibrium configuration, which happens in 86% of the games. Results show that complete information speeds up the game via...
 
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