Marjolein J. W. Harmsen van Hout

Communication Network Formation with Link Specificity and Value Transferability

We model strategic communication network formation with (i) link specificity: link maintenance lowers specific attention and thus value (negative externality previously ignored for communication) and (ii) value transferability via indirect links for informational but not for social value (positive externality modeled uniformly before). Assuming only social value, the pairwise stable set includes many nonstandard networks under high and particular combinations of complete components under low link specificity. Allowing for social and informational value reduces this set to certain fragmented networks under high and the complete network under low link specificity. These extremes are efficient, whereas intermediate link specificity generates inefficiency.

Behavioral Effects in Individual Decisions of Network Formation: Complexity Reduces Payoff Orientation and Social Preferences

Network formation constitutes an important part of many social and economic processes, but relatively little is known about how individuals make their linking decisions in networks. This article provides an experimental investigation of behavioral effects in individual decisions of network formation. Our findings demonstrate that the inherent complexity of the network setting makes individuals’ choices systematically less payoff-guided and also strongly reduces their social orientation. Furthermore, we show that specific network complexity features aggravate the former effect. These behavioral effects have important implications for researchers and managers working in areas that involve network formation.

Behavorial effects in individual decisions of network formation

Network formation constitutes an important part of many social and economic processes, but relatively little is known about how individuals make their linking decisions. This article provides an experimental investigation of behavioral effects in individual decisions of network formation. Our findings demonstrate that individuals systematically simplify more complex components of network payoff in their linking decisions. Specifically, they focus on only part of the normative payoff, namely on their own direct payoff and tend to ignore indirect payoff and payoff for others in the network. Additionally, individuals use descriptive behavioral traits of link choice alternatives to guide their choices. They are sensitive to whether an alternative involves link deletion or creation and whether it concerns an isolated or a central node. Furthermore, we find that complexity of one type can moderate individuals’ dealing with a complex feature of another type. These behavioral effects have important implications for researchers and managers working in areas that involve network formation.

The structure of online consumer communication networks

We analyze the structure of bilateral communication links among consumers in virtual communities by a game-theoretic model of network formation. First, link specificity is incorporated, meaning that the more direct links somebody has to maintain with others, the less she is able to specify her attention per link, so that the value of her links decreases. Second, a distinction is made between the social and informational value from communication, where informational value is transferable via indirect links, whereas social value is not. We characterize the set of pairwise stable structures in the case with only social value to indicate the separate impact of link specificity and demonstrate that it includes a wide range of non-standard architectures under large link specificity and particular combinations of fully connected components under low link specificity. In the case with both social and informational value, the joint effect of link specificity and value transferability is shown to reduce the pairwise stable set to particular fragmented architectures under large link specificity or rather to the complete network under small link specificity.

Heuristic decision making in network linking

Network formation among individuals constitutes an important part of many OR processes, but relatively little is known about how individuals make their linking decisions in networks. This article provides an investigation of heuristic effects in individual linking decisions for network formation in an incentivized lab-experimental setting. Our mixed logit analysis demonstrates that the inherent complexity of the network linking setting causes individuals’ choices to be systematically less guided by payoff but more guided by simpler heuristic decision cues, and that this shift is systematically stronger for social payoff than for own payoff. Furthermore, we show that the specific complexity factors value transferability and social tradeoff aggravate the former effect. These heuristic effects have important research and policy implications in areas that involve network formation.