Social network and private provision of public goods

Bulat Sanditov and Saurabh Arora ()
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Bulat Sanditov: TELECOM Ecole de Management, Institut Mines-T´el´ecom, France
Saurabh Arora: Science Policy Research Unit, University of Sussex, UK

SPRU Working Paper Series from SPRU - Science Policy Research Unit, University of Sussex Business School

Abstract: Using a simple model with interdependent utilities, we study how social networks influence individual voluntary contributions to the provision of a public good. Departing from the stan- dard model of public good provision, we assume that an agent’s utility has two terms: (a) ‘ego’-utility derived from the agent’s consumption of public and private goods, and (b) a so- cial utility which is the sum of utility spillovers from other agents with whom the agent has social relationships. We establish conditions for the existence of a unique interior Nash equi- librium and describe the equilibrium in terms of network characteristics. We show that social network always has a positive effect on the provision of the public good. We also find that, in networks with “small world”-like modular structures, ‘bridging’ ties connecting distant parts of social network play an important role inducing the agent’s contribution to public good. Assumptions and results of the model are discussed in relation to the role of social capital in community-level development projects and to the effect of innovation networks on firms’ R&D investments.

Keywords: public goods; interrelated utilities; social capital; R&D networks (search for similar items in EconPapers)
JEL-codes: D85 H41 O31 (search for similar items in EconPapers)
Date: 2015-12
New Economics Papers: this item is included in nep-cdm, nep-cse, nep-ino, nep-mic, nep-net, nep-ppm, nep-sbm, nep-soc, nep-upt and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:sru:ssewps:2015-35

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