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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Paper provided by Bureau d'Economie Théorique et Appliquée, ULP, Strasbourg in its series Working Papers of BETA with number
2006-16.
Find related papers by JEL classification: D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation C63 - Mathematical and Quantitative Methods - - Mathematical Methods and Programming - - - Computational Techniques Z13 - Other Special Topics - - Cultural Economics - - - Social Norms and Social Capital; Social Networks Economic Anthropology
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