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) centersponsored
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 centersponsored
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.