Social Networks and Interactions in Cities

Robert Helsley and Yves Zenou

No 5506, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We examine how interaction choices depend on the interplay of social and physical distance, and show that agents who are more central in the social network, or are located closer to the geographic center of interaction, choose higher levels of interactions in equilibrium. As a result, the level of interactivity in the economy as a whole will rise with the density of links in the social network and with the degree to which agents are clustered in physical space. When agents can choose geographic locations, there is a tendency for those who are more central in the social network to locate closer to the interaction center, leading to a form of endogenous geographic separation based on social distance. Finally, we show that the market equilibrium is not optimal because of social externalities. We determine the value of the subsidy to interactions that could support the first-best allocation as an equilibrium and show that interaction effort and the incentives for clustering are higher under the subsidy program.

Keywords: urban-land use; Bonacich centrality; social networks (search for similar items in EconPapers)
JEL-codes: D85 R14 Z13 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2011-02
New Economics Papers: this item is included in nep-geo, nep-net, nep-soc and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

Published - published in: Journal of Economic Theory, 2014, 150, 426-466

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Related works:
Journal Article: Social networks and interactions in cities (2014)
Working Paper: Social Networks and Interactions in Cities (2011)
Working Paper: Social Networks and Interactions in Cities (2011)
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