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

Listed author(s):
  • 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. 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).
  2. Deborah F. Minehart & Rachel E. Kranton, 2000. "original papers : Competition for goods in buyer-seller networks," Review of Economic Design, Springer;Society for Economic Design, vol. 5(3), pages 301-331.
  3. Robles, Jack, 1998. "Evolution with Changing Mutation Rates," Journal of Economic Theory, Elsevier, vol. 79(2), pages 207-223, April.
  4. Venkatesh Bala & Sanjeev Goyal, 2000. "A Noncooperative Model of Network Formation," Econometrica, Econometric Society, vol. 68(5), pages 1181-1230, September.
  5. Sanjeev Goyal & Marco van der Leij & Jose Luis Moraga, 2004. "Economics: An Emerging Small World?," Tinbergen Institute Discussion Papers 04-001/1, Tinbergen Institute.
  6. Goyal, S. & Joshi, S., 2000. "Networks of Collaboration in Oligopoly," Econometric Institute Research Papers EI 9952-/A, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
  7. Jaffe, A.B. & Trajtenberg, M., 1992. "Geographic Localization of Knowledge Spillovers as Evidenced by Patent Citations," Papers 14-92, Tel Aviv.
  8. Galeotti, Andrea & Goyal, Sanjeev & Kamphorst, Jurjen, 2003. "Network Formation with Heterogeneous Players," Economics Discussion Papers 2996, University of Essex, Department of Economics.
  9. Matthew O. Jackson & Asher Wolinsky, 1994. "A Strategic Model of Social and Economic Networks," Discussion Papers 1098, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  10. Calvo-Armengol, Antoni, 2004. "Job contact networks," Journal of Economic Theory, Elsevier, vol. 115(1), pages 191-206, March.
  11. Robert P. Gilles & Cathleen Johnson, 2000. "original papers : Spatial social networks," Review of Economic Design, Springer;Society for Economic Design, vol. 5(3), pages 273-299.
  12. 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.
  13. Young, H Peyton, 1993. "The Evolution of Conventions," Econometrica, Econometric Society, vol. 61(1), pages 57-84, January.
  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. Sumit Joshi, 2000. "Networks of Collaboration in Oligopoly," Econometric Society World Congress 2000 Contributed Papers 0623, Econometric Society.
  16. Allen, Robert C., 1983. "Collective invention," Journal of Economic Behavior & Organization, Elsevier, vol. 4(1), pages 1-24, March.
  17. Jackson, Matthew O. & Watts, Alison, 2002. "The Evolution of Social and Economic Networks," Journal of Economic Theory, Elsevier, vol. 106(2), pages 265-295, October.
  18. repec:adr:anecst:y:2005:i:79-80:p:08 is not listed on IDEAS
  19. Jasjit Singh, 2005. "Collaborative Networks as Determinants of Knowledge Diffusion Patterns," Management Science, INFORMS, vol. 51(5), pages 756-770, May.
  20. M. T. Gastner & M. E.J. Newman, 2006. "The spatial structure of networks," The European Physical Journal B: Condensed Matter and Complex Systems, Springer;EDP Sciences, vol. 49(2), pages 247-252, 01.
  21. 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.
  22. Cowan Robin & Jonard Nicolas, 2000. "The Dynamics of Collective Invention," Research Memorandum 018, Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT).
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