Departures from Best Response in Market-like Link Formation: An experimental study

We design a laboratory experiment to investigate two-sided link formation in a setting where payo s are heterogeneous and depend on direct links only. Our link formation rule is decentralized and players can make link o ers and counter-o ers, as in a Beckerian marriage market. The game is designed in such a way that if participants play a myopic payo -maximizing best response, it leads to an unique equilibrium con guration that does not depend on the game's initial conditions. We test whether this equilibrium is obtained under experimental conditions, and which individual motivations and decision-making techniques make players depart from best response. Results show that sub-optimal choices are mostly driven by imperfect information on other's payo s, self-censoring, and satis cing heuristics. irrational responder choices may be interpreted as inertia and switching costs. JEL codes: D85; C91; C92