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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. Jasjit Singh, 2005. "Collaborative Networks as Determinants of Knowledge Diffusion Patterns," Management Science, INFORMS, vol. 51(5), pages 756-770, May.
  2. Andrea Galeotti & Sanjeev Goyal, 2002. "Network Formation with Heterogeneous Players," Tinbergen Institute Discussion Papers 02-069/1, Tinbergen Institute.
  3. Robert P. Gilles & Cathleen Johnson, 2000. "original papers : Spatial social networks," Review of Economic Design, Springer, vol. 5(3), pages 273-299.
  4. Sanjeev Goyal & Marco van der Leij & José Luis Moraga-Gonzàlez, 2004. "Economics: An Emerging Small World?," Working Papers 2004.84, Fondazione Eni Enrico Mattei.
  5. Cowan,Robin & Jonard,Nicolas, 2000. "The Dynamics of Collective Invention," Research Memorandum 018, Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT).
  6. Fernando Vega Redondo, 2002. "Building Up Social Capital In A Changing World," Working Papers. Serie AD 2002-26, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  7. Jackson, Matthew O., 1998. "The Evolution of Social and Economic Networks," Working Papers 1044, California Institute of Technology, Division of the Humanities and Social Sciences.
  8. Matthew O. Jackson & Brian W. Rogers, 2005. "The Economics of Small Worlds," Journal of the European Economic Association, MIT Press, vol. 3(2-3), pages 617-627, 04/05.
  9. Matthew O. Jackson & Asher Wolinsky, 1995. "A Strategic Model of Social and Economic Networks," Discussion Papers 1098R, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  10. Jaffe, A.B. & Trajtenberg, M., 1992. "Geographic Localization of Knowledge Spillovers as Evidenced by Patent Citations," Papers 14-92, Tel Aviv.
  11. Goyal, Sanjeev & Joshi, Sumit, 2003. "Networks of collaboration in oligopoly," Games and Economic Behavior, Elsevier, vol. 43(1), pages 57-85, April.
  12. Paul Almeida & Bruce Kogut, 1999. "Localization of Knowledge and the Mobility of Engineers in Regional Networks," Management Science, INFORMS, vol. 45(7), pages 905-917, July.
  13. Robles, Jack, 1998. "Evolution with Changing Mutation Rates," Journal of Economic Theory, Elsevier, vol. 79(2), pages 207-223, April.
  14. 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., vol. 7(01), pages 77-92.
  15. Young, H Peyton, 1993. "The Evolution of Conventions," Econometrica, Econometric Society, vol. 61(1), pages 57-84, January.
  16. Calvo-Armengol, Antoni, 2004. "Job contact networks," Journal of Economic Theory, Elsevier, vol. 115(1), pages 191-206, March.
  17. Stefano Breschi & Francesco Lissoni, 2010. ""Cross-firm" Inventors and Social Networks: Localized Knowledge Spillovers Revisited," NBER Chapters, in: Contributions in Memory of Zvi Griliches, pages 189-209 National Bureau of Economic Research, Inc.
  18. M. T. Gastner & M. E.J. Newman, 2006. "The spatial structure of networks," The European Physical Journal B - Condensed Matter and Complex Systems, Springer, vol. 49(2), pages 247-252, 01.
  19. Allen, Robert C., 1983. "Collective invention," Journal of Economic Behavior & Organization, Elsevier, vol. 4(1), pages 1-24, March.
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