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Knowledge flows and the geography of networks. A strategic model of small worlds formation

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  • Nicolas Carayol
  • Pascale Roux

Abstract

This paper aims to demonstrate that the strategic approach of network formation can generate networks that share the main structural properties of most real social networks. We introduce a spatialized variation of the Connections model (Jackson and Wolinski, 1996) in which agents balance the benefits of forming links resulting from imperfect knowledge flows through bonds against their costs which increase with geographic distance. We show that, for intermediary levels of knowledge transferability, our time-inhomogeneous process selects networks which exhibit high clustering, short average distances and, when the costs of link formation are normally distributed across agents, skewed degree distributions.

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Bibliographic Info

Paper provided by Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg in its series Working Papers of BETA with number 2006-16.

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Date of creation: 2006
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Handle: RePEc:ulp:sbbeta:2006-16

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Keywords: Strategic network formation ; Time-inhomogeneous process ; Knowledge flows ; Small worlds ; Monte Carlo simulations.;

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References

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  1. Jackson, Matthew O. & Rogers, Brian W., 2005. "The economics of small worlds," Working Papers, California Institute of Technology, Division of the Humanities and Social Sciences 1214, California Institute of Technology, Division of the Humanities and Social Sciences.
  2. Stefano BRESCHI & Francesco LISSONI, 2005. "“Cross-firm” Inventors and Social Networks: Localised Knowledge Spillovers Revisited," Annales d'Economie et de Statistique, ENSAE, issue 79-80, pages 189-209.
  3. Vega-Redondo, Fernando, 2006. "Building up social capital in a changing world," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 30(11), pages 2305-2338, November.
  4. Cowan,Robin & Jonard,Nicolas, 2000. "The Dynamics of Collective Invention," Research Memorandum, Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT) 018, Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT).
  5. Matthew O. Jackson & Asher Wolinsky, 1994. "A Strategic Model of Social and Economic Networks," Discussion Papers, Northwestern University, Center for Mathematical Studies in Economics and Management Science 1098, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  6. Jackson, Matthew O. & Watts, Alison, 2002. "The Evolution of Social and Economic Networks," Journal of Economic Theory, Elsevier, Elsevier, vol. 106(2), pages 265-295, October.
  7. M. T. Gastner & M. E.J. Newman, 2006. "The spatial structure of networks," The European Physical Journal B - Condensed Matter and Complex Systems, Springer, Springer, vol. 49(2), pages 247-252, 01.
  8. Allen, Robert C., 1983. "Collective invention," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 4(1), pages 1-24, March.
  9. Goyal, Sanjeev & Joshi, Sumit, 2003. "Networks of collaboration in oligopoly," Games and Economic Behavior, Elsevier, Elsevier, vol. 43(1), pages 57-85, April.
  10. Jasjit Singh, 2005. "Collaborative Networks as Determinants of Knowledge Diffusion Patterns," Management Science, INFORMS, INFORMS, vol. 51(5), pages 756-770, May.
  11. Sanjeev Goyal & Marco van der Leij & José Luis Moraga Gonzales, 2004. "Economics: An Emerging Small World?," CESifo Working Paper Series, CESifo Group Munich 1287, CESifo Group Munich.
  12. Andrea Galeotti & Sanjeev Goyal & Jurjen Kamphorst, 2003. "Network Formation with Heterogeneous Players," Economics Discussion Papers, University of Essex, Department of Economics 562, University of Essex, Department of Economics.
  13. Young, H Peyton, 1993. "The Evolution of Conventions," Econometrica, Econometric Society, Econometric Society, vol. 61(1), pages 57-84, January.
  14. Jaffe, A.B. & Trajtenberg, M., 1992. "Geographic Localization of Knowledge Spillovers as Evidenced by Patent Citations," Papers, Tel Aviv 14-92, Tel Aviv.
  15. Nicolas Carayol & Pascale Roux, 2004. "Behavioral Foundations And Equilibrium Notions For Social Network Formation Processes," Advances in Complex Systems (ACS), World Scientific Publishing Co. Pte. Ltd., World Scientific Publishing Co. Pte. Ltd., vol. 7(01), pages 77-92.
  16. Robert P. Gilles & Cathleen Johnson, 2000. "original papers : Spatial social networks," Review of Economic Design, Springer, Springer, vol. 5(3), pages 273-299.
  17. Calvo-Armengol, Antoni, 2004. "Job contact networks," Journal of Economic Theory, Elsevier, Elsevier, vol. 115(1), pages 191-206, March.
  18. Robles, Jack, 1998. "Evolution with Changing Mutation Rates," Journal of Economic Theory, Elsevier, Elsevier, vol. 79(2), pages 207-223, April.
  19. Paul Almeida & Bruce Kogut, 1999. "Localization of Knowledge and the Mobility of Engineers in Regional Networks," Management Science, INFORMS, INFORMS, vol. 45(7), pages 905-917, July.
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