Keeping up with the Neighbors: Social Interaction in a Production Economy

Zhenhua Feng, Jaimie W. Lien and Jie Zheng
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Zhenhua Feng: Institute of Economics, Tsinghua University, Beijing 100084, China
Jaimie W. Lien: Department of Decision Sciences and Managerial Economics, The Chinese University of Hong Kong, Shatin, New Territories, Hong Kong, China
Jie Zheng: Department of Economics, School of Economics and Management, Tsinghua University, Beijing 100084, China

Mathematics, 2018, vol. 6, issue 9, 1-14

Abstract: It is well-documented that individuals care about how others around them are doing. This paper studies a production economy in which consumers provide labor supply to a representative firm to earn income for consumption, and their utility depends on their own leisure time, their own consumption level, as well as their neighbors’ consumption levels. We characterize the unique equilibrium for such an economy, allowing for three different types of effects of the neighborhood size: linear effect, zero effect, and nonlinear effect. Four network structures (empty network, ring network, star network, and core-periphery network) with different production technologies are analyzed. Our work contributes to a better understanding of the general equilibrium effect of social preferences and network structures.

Keywords: production economy; social preferences; general equilibrium; social network (search for similar items in EconPapers)
JEL-codes: C (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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