Building Up Social Capital in a Changing World: A Network Approach
This paper models the dynamic process through which a large society may succeed in building up its “social capital” by establishing a stable and dense pattern of interaction among its members. In the model, agents interact according to a collection of infinitely repeated Prisoner’s Dilemmas played on the current social network. This network not only specifies the playing partners but, crucially, also determines how relevant strategic information diffuses or new cooperation opportunities are found. Over time, the underlying payoffs randomly change, i.e. display some “volatility”, which leads agents to react by creating new links and removing others. The process is ergodic, so we use numerical simulations to “compute” its long-run invariant behavior and obtain the following conclusions: (a) Only if payoff volatility is not too high can the society sustain a dense social network. (b) The social architecture endogenously responds to increased volatility by becoming more cohesive. (c) Network-based strategic effects are an essential buffer that preclude the abrupt collapse of the social network in the face of growing volatility. These conclusions, largely in tune with those of the social-capital literature, are further studied analytically in a companion paper through the use of mean-field techniques.
|Date of creation:||Jun 2003|
|Date of revision:|
|Contact details of provider:|| Postal: Corso Magenta, 63 - 20123 Milan|
Web page: http://www.feem.it/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- B. Douglas Bernheim & Michael D. Whinston, 1990. "Multimarket Contact and Collusive Behavior," RAND Journal of Economics, The RAND Corporation, vol. 21(1), pages 1-26, Spring.
- Matthew Haag & Roger Lagunoff, 1999.
"Social Norms, Local Interaction, and Neighborhood Planning,"
Game Theory and Information
- Matthew Haag & Roger Lagunoff, 2006. "Social Norms, Local Interaction, And Neighborhood Planning ," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 47(1), pages 265-296, 02.
- Matthew Haag & Roger Lagunoff, 2000. "social Norms, Local Interaction and Neighborhood Planning," Levine's Working Paper Archive 2049, David K. Levine.
- Ellison, Glenn, 1993.
"Learning, Local Interaction, and Coordination,"
Econometric Society, vol. 61(5), pages 1047-71, September.
- Kandori, M. & Mailath, G.J., 1991.
"Learning, Mutation, And Long Run Equilibria In Games,"
71, Princeton, Woodrow Wilson School - John M. Olin Program.
- Kandori, Michihiro & Mailath, George J & Rob, Rafael, 1993. "Learning, Mutation, and Long Run Equilibria in Games," Econometrica, Econometric Society, vol. 61(1), pages 29-56, January.
- M. Kandori & G. Mailath & R. Rob, 1999. "Learning, Mutation and Long Run Equilibria in Games," Levine's Working Paper Archive 500, David K. Levine.
- Goyal, Sanjeev & Vega-Redondo, Fernando, 2005.
"Network formation and social coordination,"
Games and Economic Behavior,
Elsevier, vol. 50(2), pages 178-207, February.
- Young, H Peyton, 1993. "The Evolution of Conventions," Econometrica, Econometric Society, vol. 61(1), pages 57-84, January.
- Vega-Redondo, Fernando, 2006.
"Building up social capital in a changing world,"
Journal of Economic Dynamics and Control,
Elsevier, vol. 30(11), pages 2305-2338, November.
- Michihiro Kandori, 1992. "Social Norms and Community Enforcement," Review of Economic Studies, Oxford University Press, vol. 59(1), pages 63-80.
- Glenn Ellison, 1994. "Cooperation in the Prisoner's Dilemma with Anonymous Random Matching," Review of Economic Studies, Oxford University Press, vol. 61(3), pages 567-588.
When requesting a correction, please mention this item's handle: RePEc:fem:femwpa:2003.53. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (barbara racah)
If references are entirely missing, you can add them using this form.