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The Opportunity Cost of Social Relations: on the Effectiveness of Small Worlds

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  • Lorenzo Cassi

    (CESPRI, Università Commerciale Bocconi, Milano, Italy)

  • Lorenzo Zirulia

    (CESPRI, Università Commerciale Bocconi, Milano, Italy)

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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File URL: ftp://ftp.unibocconi.it/pub/RePEc/cri/papers/WP175CassiZirulia.pdf
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Bibliographic Info

Paper provided by KITeS, Centre for Knowledge, Internationalization and Technology Studies, Universita' Bocconi, Milano, Italy in its series KITeS Working Papers with number 175.

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Length: 28 pages
Date of creation: Sep 2005
Date of revision: Sep 2005
Handle: RePEc:cri:cespri:wp175

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Keywords: Knowledge; Networks; Small worlds; Diffusion; Learning;

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References

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  1. Robin Cowan & Paul A. David & Dominique Foray, 1999. "The Explicit Economics of Knowledge Codification and Tacitness," Working Papers 99027, Stanford University, Department of Economics.
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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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