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Can People form Links to Efficiently Access Information?

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  • A Stefano Caria
  • Marcel Fafchamps

Abstract

We investigate how individuals form social connections to access information. In our link formation game of one-way flows, the myopic best response is to link to the node with the highest informational reach, which depends on indirect links. This strategy leads to the efficient circle network. We find that myopic best response predicts the links that subjects form. However, some subjects target high-degree nodes instead, neglecting indirect connections. This reduces network efficiency. We obtain similar findings when subjects link to transfer information to others. Using a minimal group treatment, we also find evidence of in-group homophily in link formation.

Suggested Citation

  • A Stefano Caria & Marcel Fafchamps, 2020. "Can People form Links to Efficiently Access Information?," The Economic Journal, Royal Economic Society, vol. 130(631), pages 1966-1994.
    • Handle: RePEc:oup:econjl:v:130:y:2020:i:631:p:1966-1994.
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    File URL: http://hdl.handle.net/10.1093/ej/ueaa064
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    Cited by:

    1. Stefan Dimitriadis & Rembrand Koning, 2022. "Social Skills Improve Business Performance: Evidence from a Randomized Control Trial with Entrepreneurs in Togo," Management Science, INFORMS, vol. 68(12), pages 8635-8657, December.
    2. Tom Lane, 2023. "The strategic use of social identity," Discussion Papers 2023-01, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.

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