Social Interactions and Spillovers
Antonio Cabrales (),
Antoni Calvó-Armengol and
Yves Zenou ()
No 8127, CEPR Discussion Papers from C.E.P.R. Discussion Papers
The aim of this paper is to provide a tractable model where both socialization (or network formation) and productive efforts can be analyzed simultaneously. This permits a full-fledged equilibrium/welfare analysis of network formation with endogenous productive efforts and heterogeneous agents. We show that there exist two stable interior equilibria, which we can Pareto rank. The socially efficient outcome lies between these two equilibria. When the intrinsic returns to production and socialization increase, all equilibrium actions decrease at the Pareto-superior equilibrium, while they increase at the Pareto-inferior equilibrium. In both cases, the percentage change in socialization effort is higher (in absolute value) than that of the productive effort.
Keywords: network formation; peer effects; welfare (search for similar items in EconPapers)
JEL-codes: L22 L51 O31 O38 (search for similar items in EconPapers)
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Journal Article: Social interactions and spillovers (2011)
Working Paper: Social Interactions and Spillovers (2010)
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