Social network and private provision of public goods

Bulat Sanditov () and Saurabh Arora
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Bulat Sanditov: IMT-BS - DEFI - Département Droit, Économie et Finances - TEM - Télécom Ecole de Management - IMT - Institut Mines-Télécom [Paris] - IMT-BS - Institut Mines-Télécom Business School - IMT - Institut Mines-Télécom [Paris], LITEM - Laboratoire en Innovation, Technologies, Economie et Management (EA 7363) - UEVE - Université d'Évry-Val-d'Essonne - TEM - Télécom Ecole de Management
Saurabh Arora: SPRU - Science and Technology Policy Research - University of Sussex

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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 standard 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 social 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 equilibrium 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 an 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: Social capital; R&D networks; Bonding and bridging; Interrelated utilities; Social network analysis; Public goods (search for similar items in EconPapers)
Date: 2016-03
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Citations: View citations in EconPapers (2)

Published in Journal of Evolutionary Economics, 2016, 26 (1), pp.195 - 218. ⟨10.1007/s00191-015-0436-2⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01293681

DOI: 10.1007/s00191-015-0436-2

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