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Social Interactions and Spillovers

  • Cabrales, Antonio

    ()

    (Universidad Carlos III de Madrid)

  • Calvó-Armengol, Antoni

    (Universitat Autònoma de Barcelona)

  • Zenou, Yves

    ()

    (Dept. of Economics, Stockholm University)

The aim of this paper is to provide a tractable model where both socialization (or network formation) and productive efforts can be analyzed simultaneously. This permits a full-fledged equilibrium/welfare analysis of network formation with endogenous productive efforts and heterogeneous agents. We show that there exist two stable interior equilibria, which we can Pareto rank. The socially efficient outcome lies between these two equilibria. When the intrinsic returns to production and socialization increase, all equilibrium actions decrease at the Pareto-superior equilibrium, while they increase at the Pareto-inferior equilibrium. In both cases, the percentage change in socialization effort is higher (in absolute value) than that of the productive effort.

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Paper provided by Stockholm University, Department of Economics in its series Research Papers in Economics with number 2010:20.

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Length: 37 pages
Date of creation: 08 Nov 2010
Date of revision:
Handle: RePEc:hhs:sunrpe:2010_0020
Contact details of provider: Postal: Department of Economics, Stockholm, S-106 91 Stockholm, Sweden
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Fax: +46 8 16 14 25
Web page: http://www.ne.su.se/
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  1. repec:ese:iserwp:2010-14 is not listed on IDEAS
  2. Yannis M. Ioannides & Adriaan R. Soetevent, 2005. "Social Networking and Individual Outcomes Beyond the Mean Field Case," Discussion Papers Series, Department of Economics, Tufts University 0521, Department of Economics, Tufts University.
  3. Coralio Ballester & Antoni Calvo-Armengol & Yves Zenou, 2005. "Who's Who in Networks. Wanted: the Key Player," NajEcon Working Paper Reviews 666156000000000586, www.najecon.org.
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  14. Steven N. Durlauf, 2002. "On the Empirics of Social Capital," Economic Journal, Royal Economic Society, vol. 112(483), pages 459-479, November.
  15. Bloch, Francis & Dutta, Bhaskar, 2009. "Communication networks with endogenous link strength," Games and Economic Behavior, Elsevier, vol. 66(1), pages 39-56, May.
  16. Patacchini, Eleonora & Zenou, Yves, 2004. "Intergenerational Education Transmission: Neighbourhood Quality and/or Parents' Involvement," CEPR Discussion Papers 4744, C.E.P.R. Discussion Papers.
  17. Milligan, Kevin & Moretti, Enrico & Oreopoulos, Philip, 2004. "Does education improve citizenship? Evidence from the United States and the United Kingdom," Journal of Public Economics, Elsevier, vol. 88(9-10), pages 1667-1695, August.
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  19. Bramoulle, Yann & Kranton, Rachel, 2007. "Public goods in networks," Journal of Economic Theory, Elsevier, vol. 135(1), pages 478-494, July.
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