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Frontiers of economic theory and policy NO.14

2024-05-31 10:56:23


Network formation and efficiency in linear-quadratic games:An experimental study


We experimentally study effort provision and network formation in the linear-quadratic game characterized by positive externality and complementarity of effort choices among network neighbors. We compare experimental outcomes to the equilibrium and efficient allocations and study the impact of group size and linking costs. We find that individuals overprovide effort relative to the equilibrium level on the network they form. However, their payoffs are lower than the equilibrium payoffs because they create fewer links than it is optimal which limits the beneficial spillovers of effort provision. Reducing the linking costs does not significantly increase the connectedness of the network and the welfaré loss is higher in larger groups. Individuals connect to the highest effort providers in the group and ignore links to relative low effort providers, even if those links would be beneficial to form. This effect explains the lack of links in the network.

Lecturer:Gergely Horvath

Dr.Horváth is an associate professor at Duke Kunshan University. His research focuses on experimental and behavioral economics,social network analysis, labor economics, applied emicroeconomics, and agent-based modeling: His work includes the impact of social networks on job finding and labor market outcomes, the competition for social status in networks, discrimination in the labor market, entrepreneurship among ethnic minorities, whistleblowing in organizations, bank runs, and the evolution of cooperation. Dr.Horváth has published on the European Economic Review, Journal of Economic Behavior and Organization, Scandinavian Journal of Economics, Journal of Behavioral and Experimental Economics etc.

Time: May 10 ,2024 15:00-17:00

Venue: B438,ZhixinBuilding,Central Campus