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Social Networks and the Aggregation on Individual Decisions

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  • D. Lee Heavner
  • Lance Lochner

Abstract

This paper analyzes individual decisions to participate in an activity and the aggregation of those decisions when individuals gather information about the outcomes and choices of (a few) others in their social network. In this environment, aggregate participation rates are generally inefficient. Increasing the size of social networks does not necessarily increase efficiency and can lead to less efficient long-run outcomes. Both subsidies for participation and penalties for non-participation can increase participation rates, though not necessarily by the same amount. Punishing non-participation has much greater effects on participation rates than rewarding participation when current rates are very low. A program that provides youth with mentors who have participated themselves can increase participation rates, especially when those rates are low. Finally, communities plagued by the flight of successful participants will experience lower short- and long-run participation rates.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 8979.

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Date of creation: Jun 2002
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Handle: RePEc:nbr:nberwo:8979

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Cited by:
  1. Lance Lochner, 2007. "Individual Perceptions of the Criminal Justice System," American Economic Review, American Economic Association, vol. 97(1), pages 444-460, March.
  2. Yannis M. Ioannides & Linda Datcher Loury, 2002. "Job Information Networks, Neighborhood Effects and Inequality," Discussion Papers Series, Department of Economics, Tufts University 0217, Department of Economics, Tufts University.
  3. Bjerk, David, 2010. "Thieves, thugs, and neighborhood poverty," Journal of Urban Economics, Elsevier, vol. 68(3), pages 231-246, November.
  4. repec:hal:journl:halshs-00344780 is not listed on IDEAS

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