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Knowledge flows and the geography of networks: A strategic model of small world formation

  • Carayol, Nicolas
  • Roux, Pascale

This paper aims to demonstrate that the strategic approach to link formation can generate networks that share some of the main structural properties of most real social networks. For this purpose, we introduce a spatialized variation of the Connections model [Jackson, M.O., Wolinsky, A., 1996. A strategic model of social and economic networks. Journal of Economic Theory 71, 44-74] to describe the strategic formation of links by agents who balance the benefits of forming links resulting from imperfect knowledge flows against their costs, which increase with geographic distance. We show, for intermediate levels of knowledge transferability, clustering occurs in geographical space and a few agents sustain distant connections. Such networks exhibit the small world property (high clustering and short average relational distances). When the costs of link formation are normally distributed across agents, asymmetric degree distributions are also obtained.

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Article provided by Elsevier in its journal Journal of Economic Behavior & Organization.

Volume (Year): 71 (2009)
Issue (Month): 2 (August)
Pages: 414-427

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Handle: RePEc:eee:jeborg:v:71:y:2009:i:2:p:414-427
Contact details of provider: Web page: http://www.elsevier.com/locate/jebo

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  1. 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.
  2. Sanjeev Goyal & Marco van der Leij & José Luis Moraga Gonzales, 2004. "Economics: An Emerging Small World?," CESifo Working Paper Series 1287, CESifo Group Munich.
  3. Galeotti, Andrea & Goyal, Sanjeev & Kamphorst, Jurjen, 2006. "Network formation with heterogeneous players," Games and Economic Behavior, Elsevier, vol. 54(2), pages 353-372, February.
  4. 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.
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  17. Jackson, Matthew O. & Rogers, Brian W., 2005. "The economics of small worlds," Working Papers 1214, California Institute of Technology, Division of the Humanities and Social Sciences.
  18. Robert P. Gilles & Cathleen Johnson, 2000. "original papers : Spatial social networks," Review of Economic Design, Springer, vol. 5(3), pages 273-299.
  19. 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.
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