Growing stars: A laboratory analysis of network formation

Efficient information dispersion occurs with star networks, where small numbers of agents gather information for distribution to larger groups. Previous studies have shown that ex ante heterogeneity in payoff incentives among agents is sufficient for reliable star formation (Goeree et al., 2009). Using laboratory experiments, we show stars reliably emerge among ex ante homogeneous agents under specific institutional environments. Our results help to explain why star networks emerge frequently among homogeneous groups, particularly rural farming communities (Conley and Udry, 2010). Our findings have implications for developing countries where it is crucial to create mechanisms to promote efficient information sharing.