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The opportunity cost of social relations: On the effectiveness of small worlds

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  • Lorenzo Cassi
  • Lorenzo Zirulia

    ()

Abstract

The aim of this paper is to extend the theoretical literature on knowledge and network structure by considering explicitly the choice to use the social network as a learning mechanism. In the model, we consider a set of actors that creates and diffuses knowledge. They are located on a lattice (identifying the social space) and they are directly connected with a small number of other individuals. Their aim is to increase their personal knowledge. We assume that individuals can learn in two ways: individually, by elaborating their personal knowledge; or socially, by interacting with other individuals in their social neighbourhood. Given this framework, we compare network structures in terms of efficiency and equity. We find that networks characterized by low average distance perform well in the short run, when the opportunity cost of using the network is low, but cliquish networks are more efficient in the long run, when the opportunity cost is high. However, a "small world" structure, characterized both by low average distance and high cliquishness, is the most equal structure in terms of knowledge distribution.

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Bibliographic Info

Article provided by Springer in its journal Journal of Evolutionary Economics.

Volume (Year): 18 (2008)
Issue (Month): 1 (February)
Pages: 77-101

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Handle: RePEc:spr:joevec:v:18:y:2008:i:1:p:77-101

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Related research

Keywords: Knowledge; Networks; Small worlds; Diffusion; Learning; D83; O33; Z13;

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References

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  1. Dahl, Michael S. & Pedersen, Christian O.R., 2004. "Knowledge flows through informal contacts in industrial clusters: myth or reality?," Research Policy, Elsevier, vol. 33(10), pages 1673-1686, December.
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  13. Cowan,Robin & Jonard,Nicolas & Zimmermann,J-B, 2004. "On the creation of networks and knowledge," Research Memorandum 010, Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT).
  14. Cowan, Robin & David, Paul A & Foray, Dominique, 2000. "The Explicit Economics of Knowledge Codification and Tacitness," Industrial and Corporate Change, Oxford University Press, vol. 9(2), pages 211-53, June.
  15. Allen, Robert C., 1983. "Collective invention," Journal of Economic Behavior & Organization, Elsevier, vol. 4(1), pages 1-24, March.
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Cited by:
  1. Mario Maggioni & Teodora Uberti, 2011. "Networks and geography in the economics of knowledge flows," Quality & Quantity: International Journal of Methodology, Springer, vol. 45(5), pages 1031-1051, August.

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