Individual Search and Social Networks

Printer-friendly version
Working paper
Author/s: 
Sanjeev Goyal, Stephanie Rosenkranz, Utz Weitzel, Vincent Buskens
Issue number: 
2014.49
Series: 
FEEM Note di Lavoro
Publisher: 
FEEM
Year: 
2014
The explosion in online social networks motivates an enquiry into their structure and their welfare effects. A central feature of these networks is information sharing: online social networks lower the cost of getting information from others. These lower costs affect the attractiveness of individual search vis-a-vis a reliance on social networks. The paper reports the findings of an experiment on these effects. Our experiment shows that online networks can have large effects. Information acquisition is more dispersed and it is accompanied by denser social networks. Aggregate investment in information acquisition falls, but information available to individuals remains stable, due to increased networking. The overall effect is a significant increase in individual utility and aggregate welfare.
Developed by Paolo Gittoi