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Networks of Relations and Social CapitalSteffen LippertUniversity of Otago - School of Business - Department of Economics Giancarlo SpagnoloStockholm School of Economics (SITE) May 5, 2005 SSE/EFI Economics and Finance Working Paper No. 570 Abstract: We model networks of relational (or implicit) contracts, exploring how sanctioning power and equilibrium conditions change under different network configurations and information transmission technologies. In our model relations are the links, and the value of the network lies in its ability to enforce cooperative agreements that could not be sustained if agents had no access to other network members' sanctioning power and information. We identify conditions for network stability and in-network information transmission as well as conditions under which stable subnetworks inhibit more valuable larger networks. The model provides formal definitions for individual and communities' "social capital" in the spirit of Coleman and Putnam.
Number of Pages in PDF File: 46 Keywords: Networks, Relational Contracts, Implicit Contracts, Industrial Districts, Indirect Multimarket Contact, Cooperation, Collusion, Social Capital, Social Relations, Embeddedness, End-Network Effect, Peering Agreements JEL Classification: L13, L29, D23, D43, O17 working papers seriesDate posted: May 6, 2005Suggested CitationContact Information
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