Better to add item to a set, or convert final list to a set?

Option 2 sounds the most logical to me, especially with a defaultdict it should be fairly easy to do :)

import pprint
import collections

data = '''ID1 ID2 ID3
ID1 ID4 ID5
ID3 ID5 ID7 ID6'''

groups = collections.defaultdict(set)

for row in data.split('\n'):
    cols = row.split()
    for groupcol in cols:
        for col in cols:
            if col is not groupcol:
                groups[groupcol].add(col)

pprint.pprint(dict(groups))

Results:

{'ID1': set(['ID2', 'ID3', 'ID4', 'ID5']),
 'ID2': set(['ID1', 'ID3']),
 'ID3': set(['ID1', 'ID2', 'ID5', 'ID6', 'ID7']),
 'ID4': set(['ID1', 'ID5']),
 'ID5': set(['ID1', 'ID3', 'ID4', 'ID6', 'ID7']),
 'ID6': set(['ID3', 'ID5', 'ID7']),
 'ID7': set(['ID3', 'ID5', 'ID6'])}

TL;DR: Go with option 2. Just use sets from the start.

In Python, sets are hash-sets, and lists are dynamic arrays. Inserting is O(1) for both, but checking if an element exists is O(n) for the list and O(1) for the set.

So option 1 is immediately out. If you are inserting n items and need to check the list every time, then the overall complexity becomes O(n^2).

Options 2 and 3 are both optimal at O(n) overall. Option 2 might be faster in micro-benchnarks because you don't need to move objects between collections. In practice, choose the option that is easier to read and maintain in your specific circumstance.