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Social network and private provision of public goods

Version 2 2023-06-12, 06:36
Version 1 2023-06-08, 23:15
journal contribution
posted on 2023-06-12, 06:36 authored by Bulat Sanditov, Saurabh AroraSaurabh Arora
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.

History

Publication status

  • Published

File Version

  • Published version

Journal

Journal of Evolutionary Economics

ISSN

0936-9937

Publisher

Springer Verlag

Issue

1

Volume

26

Page range

195-218

Department affiliated with

  • SPRU - Science Policy Research Unit Publications

Full text available

  • No

Peer reviewed?

  • Yes

Legacy Posted Date

2015-11-23

First Compliant Deposit (FCD) Date

2021-03-05

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