Advertisement

Journal of Evolutionary Economics

, Volume 26, Issue 1, pp 195–218 | Cite as

Social network and private provision of public goods

  • Bulat SanditovEmail author
  • Saurabh Arora
Regular Article

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

Public goods Interrelated utilities Social capital Social network analysis Bonding and bridging R&D networks 

JEL Classification

H41 D85 O31 

Notes

Acknowledgments

We are grateful to two anonymous referees and the guest editor, Zakaria Babutsidze, for valuable comments. Previous versions have benefitted from generous input provided by Francesco Lissoni, Uwe Cantner, Mauro Napoletano and the participants of EMAEE’13, WEHIA’13, GCW’13 conferences, the GREThA seminar at University of Bordeaux and Jena Economic Research Seminar at Friedrich Schiller University. The usual disclaimer applies.

References

  1. Arora S, Sanditov B (2015) Cultures of caste and rural development in the social network of a South Indian Village. Sage Open 5(3)Google Scholar
  2. Arrow K (1962) Economic welfare and the allocation of resources for invention. In: Nelson R.R. (ed) The rate and direction of inventive activity: economic and social factors. National Bureau of Economic Research, pp 609–626Google Scholar
  3. Balland P-A (2012) Proximity and the evolution of collaboration networks: evidence from research and development projects within the global navigation satellite system (GNSS) industry. Regional Studies 46(6):741–756CrossRefGoogle Scholar
  4. Ballester C, Calvó-Armengol A, Zenou Y (2006) Who’s who in networks. wanted: the key player. Econometrica 74(5):1403–1417CrossRefGoogle Scholar
  5. Becker G (1976) A theory of social interactions. J Polit Econ 82:1063–1094CrossRefGoogle Scholar
  6. Bergstrom TC (1999) Systems of benevolent utility functions. J Public Econ Theory 1(1):71–100CrossRefGoogle Scholar
  7. Bergstrom TC (2006) Benefit-cost in a benevolent society. Am Econ Rev 96 (1):339–351CrossRefGoogle Scholar
  8. Bergstrom TC, Cornes RC (1983) Independence of allocative efficiency from distribution in the theory of public goods. Econometrica 51(6):1753–1765CrossRefGoogle Scholar
  9. Bloch F, Zenginobuz Ü (2007) The effect of spillovers on the provision of local public goods. Rev Econ Des 11(3):199–216Google Scholar
  10. Boschma R (2010) Proximity and innovation: a critical assessment. Reg. Stud. 39(1):61–74CrossRefGoogle Scholar
  11. Bourdieu P (1986) The forms of capital. In: Richardson J (ed) Handbook of theory and research for the sociology of education. GreenwoodGoogle Scholar
  12. Bourlès R, Bramoullé Y (2013) Altruism in networks. mimeoGoogle Scholar
  13. Bramoullé Y, Kranton R (2007) Public goods in networks. J Econ Theory 135(1):478–494CrossRefGoogle Scholar
  14. Bramoullé Y, Kranton R, D’Amours M (2014) Strategic interaction and networks. Am Econ Rev 104(3):898–930CrossRefGoogle Scholar
  15. Burt R (2000) The network structure of social capital. Res Organ Behav 22:345–423CrossRefGoogle Scholar
  16. Cohen WM, Levinthal DA (1989) Innovation and learning: the two faces of R&D. Econ J 99(397):569–96CrossRefGoogle Scholar
  17. Cowan R, Jonard N (2003) The dynamics of collective invention. J Econ Behav Organ 52(4):513–532CrossRefGoogle Scholar
  18. Cowan R, Jonard N (2007) Structural holes, innovation and the distribution of ideas. J Econ Interac Coord 2(2):93–110CrossRefGoogle Scholar
  19. David PA (1990) The dynamo and the computer: an historical perspective on the modern productivity paradox. AEA Pap Proc 80(2):335–361Google Scholar
  20. Elliott M, Golub B (2013) A network approach to public goods. In: Proceedings of the Fourteenth ACM Conference on Electronic Commerce. EC ’13 ACM New York, NY, pp 377–378Google Scholar
  21. Falk I, Kilpatrick S (2000) What is social capital? A study of interaction in a rural community. Sociologica ruralis 40(1):87–110CrossRefGoogle Scholar
  22. Gambardella A, McGahan AM (2010) Business model innovation: general purpose technologies and their Implications for Industry Structure. Long Range Plan 43:262–271CrossRefGoogle Scholar
  23. Gould RV, Fernandez RM (1989) Structures of mediation: a formal approach to brokerage in transaction networks. Sociol Methodol 19:89–126CrossRefGoogle Scholar
  24. Hanifan LJ (1916) The rural school community center. Annals of the American Academy of Political and Social Science 67:130–138Google Scholar
  25. Horn RA, Johnson CR (1994) Topics in matrix analysis. Cambridge University PressGoogle Scholar
  26. Isham J, Kähkönen S (2002) How do participation and social capital affect community-based water projects? Evidence from Central Java, Indonesia. In: Grootaert C, van Bastelaer T (eds) The role of social capital in development: an empirical assessment. Cambridge University PressGoogle Scholar
  27. Jackson MO, Zenou Y (2014) Games on Networks. In: Young P, Zamir S (eds) Handbook of game theory, vol 4. Elsevier ScienceGoogle Scholar
  28. Ley E (1997) Optimal provision of public goods with altruistic individuals. Econ Lett 54(1):23–27CrossRefGoogle Scholar
  29. Motiram S, Osberg L (2010) Social capital and basic goods: the cautionary tale of drinking water in India. Econ Dev Cult Chang 59(1):63–94CrossRefGoogle Scholar
  30. Paldam M (2005) Social capital and social policy. In: Paper presented at New Frontiers of Social Policy ConferenceGoogle Scholar
  31. Pargal S, Gilligan D, Huq M (2002) Does social capital increase participation in voluntary solid waste management? Evidence from Dhaka, Bangladesh. In: Grootaert C, van Bastelaer T (eds) The role of social capital in development: an empirical assessment. Cambridge University PressGoogle Scholar
  32. Portes A (2000) The two meanings of social capital. Sociol Forum 15(1):1–12CrossRefGoogle Scholar
  33. Uzzi B, Spiro J (2005) Collaboration and creativity: the small world problem. Am J Sociol 111(2):447–504CrossRefGoogle Scholar
  34. Watts DJ, Strogatz SH (1998) Collective dynamics of ‘small-world’ networks. Nature 393(6684):440–442CrossRefGoogle Scholar
  35. Wellman B (1979) The community question: the intimate networks of East Yorkers. Am J Sociol 84(5):1201–1231CrossRefGoogle Scholar

Copyright information

© Springer-Verlag Berlin Heidelberg 2015

Authors and Affiliations

  1. 1.TELECOM Ecole de ManagementInstitut Mines-TélécomEvry CedexFrance
  2. 2.Science Policy Research UnitUniversity of SussexBrightonUK

Personalised recommendations