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There have been a number of papers in the literature (pioneered by Sanjeev Goyal, Jackson, Kranton, amongst others) emphasising the role and importance of network structure in economics, the equilibrium arising therein and the relationship between the topology and other graph properties and the equilibrium.

Such networks arise in a number of cases, for example, research collaboration, social networks, crime networks, etc. My question is what published empirical studies have tested the hypothesis presented by the theory? Do such studies also find that the graph properties are critical, as predicted by the theory? Or is network effects in economics a theory-only area?

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  • $\begingroup$ There's some market microstructure stuff that looks like this. I tried to find it earlier but was unsuccessful. I seem to remember one on network models of over the counter markets applied to federal funds rate if you want to poke around yourself. those networks are for both info AND trade which makes them easier to quantify. $\endgroup$
    – jayk
    Dec 4, 2014 at 5:08

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Because the notion of pairwise stability is so important in the theory of network formation and equilibrium, there has been a few attempts to test it in experimental setups. I know at least two papers:

The first is a discussion paper. A word of warning regarding the second : the version of the paper that is linked is very much a draft. You might want to have a look to get an idea of what the authors plan on doing, but don't rely on it too much. I attended a talk where Fafchamps presented the paper this week, and he told us that they initially got the wrong data from their experiment. They only realized it rather recently and had to revise the whole paper. Because the linked draft is from February 2014, there are chances it is still based on the the old data (I did not read it).

For some field experiments on networks in development economics, you might want to have a look at other papers by Fafchamps : http://web.stanford.edu/~fafchamp/index.html. I am not sure these explicitly test equilibrium concepts though, but they might.

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There was recently a seminar at Cambridge university on 'Network Econometrics'. The list of speakers and their papers should still be on the website. If they aren't then I can email you a scanned copy.

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A couple of recent empirical works on networks:

The first paper is a very good overview of both models and real data.

There're many empirical papers, in fact. Even the US special services made research on networks. In one case, they tried to identify key officials in the Iran government. In another, they used network structure for dealing with insurgents in Afghanistan.

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