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 individuallinking 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 payof but more guided by simpler heuristic decision cues, and even stronger less motivatedby the payoff for others. 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 networkformation.

Netspar, Network for Studies on Pensions, Aging and Retirement, is a thinktank and knowledge network. Netspar is dedicated to promoting a wider understanding of the economic and social implications of pensions, aging and retirement in the Netherlands and Europe.

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