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Social interactions and spillovers

Social interactions and spillovers
Social interactions and spillovers
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.
peer effects, network formation, welfare
0899-8256
339-360
Cabrales, Antonio
64f4bf38-b2ad-498b-b9fe-c26cb6ee3b18
Calvó-Armengol, Antoni
c9717bf6-9549-42c3-bca3-353e5efbb1dc
Zenou, Yves
38bf0c72-462b-4c08-8fd1-ce365b0296dc
Cabrales, Antonio
64f4bf38-b2ad-498b-b9fe-c26cb6ee3b18
Calvó-Armengol, Antoni
c9717bf6-9549-42c3-bca3-353e5efbb1dc
Zenou, Yves
38bf0c72-462b-4c08-8fd1-ce365b0296dc

Cabrales, Antonio, Calvó-Armengol, Antoni and Zenou, Yves (2011) Social interactions and spillovers. Games and Economic Behavior, 72 (2), 339-360. (doi:10.1016/j.geb.2010.10.010).

Record type: Article

Abstract

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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More information

e-pub ahead of print date: 3 November 2010
Published date: June 2011
Keywords: peer effects, network formation, welfare
Organisations: Social Sciences

Identifiers

Local EPrints ID: 339648
URI: https://eprints.soton.ac.uk/id/eprint/339648
ISSN: 0899-8256
PURE UUID: 2044607b-df3f-4c1d-98e6-de29b604028e
ORCID for Yves Zenou: ORCID iD orcid.org/0000-0001-6516-0812

Catalogue record

Date deposited: 29 May 2012 08:47
Last modified: 29 Oct 2019 01:39

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