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

Asymmetric flow networks

This paper provides a new model of network formation that bridges the gap between the two benchmark models by Bala and Goyal, the one-way flow model, and the two-way flow model, and includes both as particular extreme cases. As in both benchmark models, in what we call an "asymmetric flow" network a link can be initiated unilaterally by any player with any other, and the flow through a link towards the player who supports it is perfect. Unlike those models, in the opposite direction there is friction or decay. When this decay is complete there is no flow and this corresponds to the one-way flow model. The limit case when the decay in the opposite direction (and asymmetry) disappears, corresponds to the two-way flow model. We characterize stable and strictly stable architectures for the whole range of parameters of this "intermediate" and more general model. We also prove the convergence of Bala and Goyal's dynamic model in this context.This research is supported by the Spanish Ministerio de Economía y Competitividad under projects ECO2009-11213 and ECO2009-07939, co-funded by the ERDF. Both authors also bene t from the Basque Government s funding to Grupos Consolidados GIC07/146-IT-377-07 and GIC07/22-IT-223-0