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Let us next consider some examples where strategic

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Unformatted text preview: usible explanation? 34 Networks: Lecture 1 Strategic Interactions Decisions and Games on Networks Social networks are interesting because they represent interactions among different agents in a social situation. Thus decisions that define these interactions (trade, trust, friendship, imitation) are key. But this implies that interactions will be strategic, and we have to think of how social networks shape strategic interactions, and also how they are formed and evolved as a result of such strategic interactions. Let us next consider some examples where strategic interactions may significantly change the way we may wish to think of network relations. 35 Networks: Lecture 1 Strategic Interactions Example I: Are More Links Always Better? Let us return to business networks. Clearly, links are “good” in this context, since they represent trust in trade relationships. But could less be more? Recall that Munshi’s argument was that network connections helped the Kathiawaris pull ahead of the richer and more established Marwaris and Palanpuris. But why don’t (didn’t) the Marwaris and the Palanpuris exploit their well-established positions and greater links (especially in Antwerp) to form even stronger network ties? 36 Networks: Lecture 1 Strategic Interactions Example I: Are More Links Always Better? (continued) Perhaps the answer is that more links are not always better. The Marwari and the Palanpuri businessmen were sufficiently more established, so they did not depend on their subcast links, so implicitly reneging on their long-term relationships within their cast would have carried relatively limited costs for them. But if so, then there would be little “trust” in the network of the Marwaris and the Palanpuris. (What does “trust” mean here?). In contrast, the Kathiawaris strongly depended on their network, so any reneging (or appearance of reneging) would lead to their exclusion from the business community supporting them forever—-and this support is very valuable to the Kathiawaris. Thus in this example, after a certain level, fewer links may be better—to make one more dependent on his network and thus more trustworthy. 37 Networks: Lecture 1 Strategic Interactions Example II: “Acting White”—Are More Links Encouraged? In many minority groups, in the United States and in developing countries, those perceived as “acting white,” that is, adopting norms and behavior patterns of majority groups, including high achievement in schooling, receive social sanctions. For example, for the caste system in India playing this role, see Munshi and Rosenzweig (2006) “Traditional Institutions Meet the Modern World: Cast, Gender and Schooling Choice in a Globalizing Economy”. Why would this be? One possible explanation may be that these kind of sanctions severe the outside links (reduce the outside options) of minority kids and make them more dependent on (and more dependable for) the minority network. See Austen-Smith and Fryer (2006) “An Economic Analysis of Acting White” for a richer model with imperfect information and signaling. 38 Networks: Lecture 1 Strategic Interaction...
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