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Effort and synergies in network formation

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  • Cabrales, Antonio
  • Calvó-Armengol, Antoni
  • Zenou, Yves

Abstract

The aim of this paper is to understand the interactions between productive effort and the creation of synergies that are the sources of technological collaboration agreements, agglomeration, social stratification, etc. We model this interaction in a way that allows us to characterize how agents devote resources to both activities. This permits a fullfledged equilibrium/welfare analysis of network formation with endogenous investment efforts and to derive unambiguous comparative statics results. In spite of its parsimony that ensures tractability, the model retains enough richness to replicate a (relatively) broad range of empirical regularities displayed by social and economic networks, and is directly estimable to recover is structural parameters.

Suggested Citation

  • Cabrales, Antonio & Calvó-Armengol, Antoni & Zenou, Yves, 2007. "Effort and synergies in network formation," UC3M Working papers. Economics we072515, Universidad Carlos III de Madrid. Departamento de Economía.
    • Handle: RePEc:cte:werepe:we072515
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    Cited by:

    1. Mohamed Belhaj & Frédéric Deroian, 2010. "Endogenous effort in communication networks under strategic complementarity," International Journal of Game Theory, Springer;Game Theory Society, vol. 39(3), pages 391-408, July.
    2. Galeotti, Andrea & Goyal, Sanjeev, 2007. "The Law of the Few," Economics Discussion Papers 2981, University of Essex, Department of Economics.
    3. Bloch, Francis & Dutta, Bhaskar, 2009. "Communication networks with endogenous link strength," Games and Economic Behavior, Elsevier, vol. 66(1), pages 39-56, May.
    4. Chuhay Roman, 2013. "Labor Market and Search through Personal Contacts," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 13(1), pages 191-213, June.

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