Strategies in Social Network Formation

We run a computerised experiment of network formation where all connections are bene cial and only direct links are costly. Players simul- taneously submit link proposals; a connection is made only when both players involved agree. We use both simulated and experimentally gen- erated data to test the determinants of individual behaviour in network formation. We nd that approximately 40% of the network formation strategies adopted by the experimental subjects can be accounted for as best responses. We test whether subjects follow alternative patterns of behaviour and in particular if they: propose links to those from whom they have received link proposals in the previous round; propose links to those who have the largest number of direct connections. We nd that together with best response behaviour, these strategies explain approxi- mately 75% of the observed choices. We estimate individual propensities to adopt each of these strategies, controlling for group e¤ects. Finally we estimate a mixture model to highlight the proportion of each type of decision maker in the population