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Heuristic Decision Making in Network Linking

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Article
Author/s: 
Harmsen-van Hout, M.J.W., B.G.C. Dellaert, and P.J.J. Herings
European Journal of Operational Research
Issue number: 
Volume 251, Issue 1, 16 May 2016
Publisher: 
Elsevier
Year: 
2016
Journal pages: 
158-170
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.
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