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Social Interactions and Spillovers

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Author Info

  • Cabrales, Antonio

    ()
    (Universidad Carlos III de Madrid)

  • Calvó-Armengol, Antoni

    (Universitat Autònoma de Barcelona)

  • Zenou, Yves

    ()
    (Dept. of Economics, Stockholm University)

Abstract

The aim of this paper is to provide a tractable model where both socialization (or network formation) and productive efforts can be analyzed simultaneously. This permits a full-fledged equilibrium/welfare analysis of network formation with endogenous productive efforts and heterogeneous agents. We show that there exist two stable interior equilibria, which we can Pareto rank. The socially efficient outcome lies between these two equilibria. When the intrinsic returns to production and socialization increase, all equilibrium actions decrease at the Pareto-superior equilibrium, while they increase at the Pareto-inferior equilibrium. In both cases, the percentage change in socialization effort is higher (in absolute value) than that of the productive effort.

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File URL: http://www2.ne.su.se/paper/wp10_20.pdf
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Bibliographic Info

Paper provided by Stockholm University, Department of Economics in its series Research Papers in Economics with number 2010:20.

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Length: 37 pages
Date of creation: 08 Nov 2010
Date of revision:
Handle: RePEc:hhs:sunrpe:2010_0020

Contact details of provider:
Postal: Department of Economics, Stockholm, S-106 91 Stockholm, Sweden
Phone: +46 8 16 20 00
Fax: +46 8 16 14 25
Email:
Web page: http://www.ne.su.se/
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Keywords: Peer effects; network formation; welfare;

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References

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Citations

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Cited by:
  1. Helsley, Robert & Zenou, Yves, 2011. "Social Networks and Interactions in Cities," CEPR Discussion Papers 8260, C.E.P.R. Discussion Papers.
  2. Jacques Durieu & Hans Haller & Philippe Solal, 2011. "Nonspecific Networking," Games, MDPI, Open Access Journal, vol. 2(1), pages 87-113, February.
  3. Lee, Lung-Fei & Liu, Xiaodong & Patacchini, Eleonora & Zenou, Yves, 2012. "Criminal Networks: Who is the Key Player?," CEPR Discussion Papers 8772, C.E.P.R. Discussion Papers.
  4. König, Michael & Tessone, Claudio J. & Zenou, Yves, 2009. "A Dynamic Model of Network Formation with Strategic Interactions," CEPR Discussion Papers 7521, C.E.P.R. Discussion Papers.
  5. Mohamed Belhaj & Sebastian Bervoets & Frédéric Deroïan, 2013. "Network Design under Local Complementarities," AMSE Working Papers 1309, Aix-Marseille School of Economics, Marseille, France, revised 12 Feb 2013.
  6. Mohamed Belhaj & Sebastian Bervoets & Frédéric Deroïan, 2013. "Network Design under Local Complementarities," Working Papers halshs-00796487, HAL.
  7. Boris van Leeuwen & Theo Offerman & Arthur Schram, 2013. "Superstars need Social Benefits: An Experiment on Network Formation," Tinbergen Institute Discussion Papers 13-112/I, Tinbergen Institute.
  8. Michael Koenig & Claudio Tessone & Yves Zenou, 2012. "Nestedness in Networks: A Theoretical Model and Some Applications," Discussion Papers 11-003, Stanford Institute for Economic Policy Research.

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