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Small World Networks with Segregation Patterns and Brokers

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  • Edoardo Gallo

    (University of Oxford)

Abstract

Many social networks have the following properties: (i) a short average distance between any two individuals; (ii) a high clustering coefficient; (iii) segregation patterns; the presence of (iv) brokers and (v) hubs. (i) and (ii) define a small world network. This paper develops a strategic network formation model where agents have heterogeneous knowledge of the network: cognizant agents know the whole network, while ignorant ones are less knowledgeable. For a broad range of parameters, all pairwise Nash (PN) networks have properties (i)-(iv). There are some PN networks with one hub. Cognizant agents have higher betweenness centrality: they are the brokers who connect different parts of the network. Ignorant agents cause the emergence of segregation patterns. The results are robust to varying the number of cognizant agents and to increasing the knowledge level of ignorant ones. An application shows the relevance of the results to assessing the welfare impact of an increase in network knowledge due to, e.g., improved access to social networking tools.

Suggested Citation

  • Edoardo Gallo, 2009. "Small World Networks with Segregation Patterns and Brokers," Working Papers 2009.34, Fondazione Eni Enrico Mattei.
  • Handle: RePEc:fem:femwpa:2009.34
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    File URL: http://www.feem.it/userfiles/attach/Publication/NDL2009/NDL2009-034.pdf
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    References listed on IDEAS

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    1. Francis Bloch & Matthew Jackson, 2006. "Definitions of equilibrium in network formation games," International Journal of Game Theory, Springer;Game Theory Society, vol. 34(3), pages 305-318, October.
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    More about this item

    Keywords

    Network; Cognitive Network; Small World; Broker; Segregation;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation

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