We present an approach to network formation based on the notion that social networks are formed by individual decisions that trade off the costs of forming and maintaining links against the potential rewards from doing so. We suppose that a link with another agent allows access, in part and in due course, to the benefits available to the latter via his own links. Thus individual links generate externalities whose value depends on the level of decayrdelay associated with indirect links. A distinctive aspect of our approach is that the costs of link formation are incurred only by the person who initiates the link. This allows us to formulate the network formation process as a noncooperative game.We first provide a characterization of the architecture of equilibrium networks. We then study the dynamics of network formation. We find that individual efforts to access benefits offered by others lead, rapidly, to the emergence of an equilibrium social network, under a variety of circumstances. The limiting networks have simple architectures, e.g., the wheel, the star, or generalizations of these networks. In many cases, such networks are also socially efficient.

When payoffs from different actions are unknown, agents use their own past experience as well as the experience of their neighbours to guide their decision making. In this paper, we develop a general framework to study the relationship between the structure of these neighbourhoods and the process of social learning.We show that, in a connected society, local learning ensures that all agents obtain the same payoffs in the long run. Thus, if actions have different payoffs, then all agents choose the same action, and social conformism obtains. We develop conditions on the distribution of prior beliefs, the structure of neighbourhoods and the informativeness of actions under which this action is optimal. In particular, we identify a property of neighbourhood structureslocal independencewhich greatly facilitates social learning. Simulations of the model generate spatial and temporal patterns of adoption that are consistent with empirical work.

We present an approach to network formation based on the notion that social networks are formed by individual decisions that trade off the costs of forming and maintaining links against the potential rewards from doing so. We suppose that a link with another agent allows access, in part and in due course, to the benefits available to the latter via his own links. Thus individual links generate externalities whose value depends on the level of decayrdelay associated with indirect links. A distinctive aspect of our approach is that the costs of link formation are incurred only by the person who initiates the link. This allows us to formulate the network formation process as a noncooperative game.We first provide a characterization of the architecture of equilibrium networks. We then study the dynamics of network formation. We find that individual efforts to access benefits offered by others lead, rapidly, to the emergence of an equilibrium social network, under a variety of circumstances. The limiting networks have simple architectures, e.g., the wheel, the star, or generalizations of these networks. In many cases, such networks are also socially efficient.

In contexts ranging from public goods provision to information collection, a player's well-being depends on his or her own action as well as on the actions taken by his or her neighbours. We provide a framework to analyse such strategic interactions when neighbourhood structure, modelled in terms of an underlying network of connections, affects payoffs. In our framework, individuals are partially informed about the structure of the social network. The introduction of incomplete information allows us to provide general results characterizing how the network structure, an individual's position within the network, the nature of games (strategic substitutes vs. complements and positive vs. negative externalities) and the level of information shape individual behaviour and payoffs. Copyright © 2009 The Review of Economic Studies Limited.

We study the evolution of social distance among economists over the period from 1970 to 2000. While the number of economists has more than doubled, the distance between them, which was already small, has declined significantly. The key to understanding the short average distances is the observation that economics is spanned by a collection of inter-linked stars. A star is an economist who writes with many other economists, most of whom have few co-authors and generally do not write with each other. * We thank the Editor, Robert Shimer, an anonymous referee and participants in various seminars for useful comments. †