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The Law of the Few

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Author Info
Andrea Galeotti ()
Sanjeev Goyal

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Abstract

The law of the few refers to the following empirical phenomenon: in social groups a very small subset of individuals invests in collecting information while the rest of the group invests in forming connections with this select few. In many instances, there are no observable differences in characteristics between those who invest in information and those who invest in forming connections. This paper shows that the law of few naturally emerges in environments with identical rational agents. We develop a strategic game in which players have the opportunity to invest in collecting information as well as in investing in bilateral connections with others. We find that every strict equilibrium of this game exhibits the ‘law of the few’. We also show that this pattern of social differentiations is efficient in some cases.

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File URL: http://www.essex.ac.uk/economics/discussion-papers/papers-text/dp636.pdf
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Paper provided by University of Essex, Department of Economics in its series Economics Discussion Papers with number 636.

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Date of creation: 29 Aug 2007
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Handle: RePEc:esx:essedp:636

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Harrison, Glenn W & Hirshleifer, Jack, 1989. "An Experimental Evaluation of Weakest Link/Best Shot Models of Public Goods," Journal of Political Economy, University of Chicago Press, vol. 97(1), pages 201-25, February. [Downloadable!] (restricted)
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  2. Antonio Cabrales & Piero Gottardi, 2008. "Markets for information : of inefficient firewalls and efficient monopolies," Economics Working Papers we080201, Universidad Carlos III, Departamento de Economía. [Downloadable!]
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  3. Andrea Galeotti & Sanjeev Goyal & Matthew O. Jackson & Fernando Vega-Redondo & Leeat Yariv, 2008. "Network Games," Economics Working Papers ECO2008/07, European University Institute. [Downloadable!]
  4. Hojman, Daniel A. & Szeidl, Adam, 2008. "Core and periphery in networks," Journal of Economic Theory, Elsevier, vol. 139(1), pages 295-309, March. [Downloadable!] (restricted)
  5. Antonio Cabrales & Antoni Calvo-Armengol & Yves Zenou, 2007. "Effort and synergies in network formation," Economics Working Papers we072515, Universidad Carlos III, Departamento de Economía. [Downloadable!]
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