The Law of the Few

Andrea Galeotti () and Sanjeev Goyal

Economics Discussion Papers from University of Essex, Department of Economics

Abstract: The law of the few refers to the following empirical phenomenon: in social groups a very small subset of individuals invests in collecting information while the rest of the group invests in forming connections with this select few. In many instances, there are no observable differences in characteristics between those who invest in information and those who invest in forming connections. This paper shows that the law of few naturally emerges in environments with identical rational agents. We develop a strategic game in which players have the opportunity to invest in collecting information as well as in investing in bilateral connections with others. We find that every strict equilibrium of this game exhibits the ‘law of the few’. We also show that this pattern of social differentiations is efficient in some cases.

New Economics Papers: this item is included in nep-gth, nep-hpe and nep-soc
Date: 2007-08-29
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