Stability in network formation games with streams of payoffs: An experimental study

We run a novel network formation experiment with a stream of payoffs and relatively unstructured link formation process, and test the performance of a number of theoretical stability concepts in this environment. We focus especially on the issue of myopic versus farsighted behaviour in network formation. A subtle treatment variation demonstrates clearly the power of myopic stability concepts in identifying the most stable networks. However, we also find support for farsighted concepts of stability, especially those that assume players are pessimistic about the eventual outcome of a deviation.