Social network and private provision of public goods

Sanditov, Bulat and Arora, Saurabh (2016) Social network and private provision of public goods. Journal of Evolutionary Economics, 26 (1). pp. 195-218. ISSN 0936-9937

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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.

Item Type: Article
Keywords: Public goods, Interrelated utilities, Social capital, Social network analysis, Bonding and bridging, R&D networks
Schools and Departments: School of Business, Management and Economics > SPRU - Science Policy Research Unit
Subjects: H Social Sciences > H Social Sciences (General)
Depositing User: Saurabh Arora
Date Deposited: 23 Nov 2015 10:20
Last Modified: 06 Mar 2017 12:28
URI: http://sro.sussex.ac.uk/id/eprint/58068

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