The Opportunity Cost of Social Relations: on the Effectiveness of Small Worlds
AbstractThe 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 InfoPaper provided by KITeS, Centre for Knowledge, Internationalization and Technology Studies, Universita' Bocconi, Milano, Italy in its series KITeS Working Papers with number 175.
Length: 28 pages
Date of creation: Sep 2005
Date of revision: Sep 2005
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Other versions of this item:
- Lorenzo Cassi & Lorenzo Zirulia, 2008. "The opportunity cost of social relations: On the effectiveness of small worlds," Journal of Evolutionary Economics, Springer, vol. 18(1), pages 77-101, February.
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
- O33 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
- Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Social and Economic Stratification
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-05-27 (All new papers)
- NEP-NET-2006-05-27 (Network Economics)
- NEP-SOC-2006-05-27 (Social Norms & Social Capital)
- NEP-URE-2006-05-27 (Urban & Real Estate Economics)
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