A network experiment in continuous time : the influence of link costs

In recent work on non-cooperative network formation star-shaped networks play an important role. In a particular theoretical model of Bala and Goyal (2000) center-sponsored stars are the only strict Nash networks. In testing this theoretical model Falk and Kosfeld (2003) do not find any experimental evidence that players select the center-sponsored star. Based on a slight modification of Bala and Goyal's model we design a network formation experiment with varying link costs in which almost all groups not only reach a strict Nash network once but also switch strict Nash networks several times. The main innovation in our experiment is to use a continuous time framework which makes coordination on "stars" much easier than simultaneous strategy adaptation in discrete time