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
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
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
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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