Networks of Relations and Social Capital

Steffen Lippert () and Giancarlo Spagnolo

No 5078, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We model networks of relational (or implicit) contracts, exploring how sanctioning power and equilibrium conditions change under different network configurations and information transmission technologies. In our model relations are the links, and the value of the network lies in its ability to enforce cooperative agreements that could not be sustained if agents had no access to other network members’ sanctioning power and information. We identify conditions for network stability and in-network information transmission as well as conditions under which stable sub-networks inhibit more valuable larger networks. The model provides formal definitions for individual and communities’ ‘social capital’ in the spirit of Coleman and Putnam.

Keywords: collusion; cooperation; embeddedness; end-network effect; implicit contracts; indirect multimarket contact; industrial districts; networks; peering agreements; relational contracts; social capital; social relations (search for similar items in EconPapers)
JEL-codes: D23 D43 L13 L29 O17 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-net
Date: 2005-05
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