Information is critical to economic decision making. One important way people obtain information is through social networks. Economists have studied the shapes (or topologies) of social networks, in an effort to understand the conditions under which one obtains efficient dissemination of information. These studies have led people to draw attention to 'star' shaped networks, which occur when small numbers of 'hub' agents gather information and distribute it to a large number of people along 'spokes'. This type of network structure is thought to be important in facilitating efficiency in a wide number of contexts, including marketing, political leadership, as well as the dissemination of new ideas and innovations. Despite the importance of 'star' networks, there remains uncertainty about the features of social and economic environments that facilitate their emergence. This is unfortunate, as many economically developing areas continue to be impeded by poorly designed information networks. Information is critical to economic decision making. In such cases, if possible, taking simple steps (by implementing the right sort of institutions) to facilitate the emergence of stars may offer substantial benefits for an area's economic growth and development. This study is an effort to discover these simple steps.
The coPI studies the impact of three institutional characteristics that often coexist with star networks in natural settings. In particular, he hypothesizes that star networks may be more likely to emerge when(1)information acquisition is costly and budgets are limited; (2) network decisions can be made in real time; and (3)there exist a certain form of property right protection, in particular the right of the first refusal, where early investors have the right (but not the obligation) to continue to play this role. All three institutions have the characteristic of stabilizing the decision environment. He hypothesizes that it is this stabilizing force that underlies the formation of reliable, resilient, stable and efficient star network formation.
Results from this project could have broader impact because it may have important implications for agricultural development, as the institutions studied could in principle easily be implemented in appropriate natural environments in order to bring improved agricultural knowledge and productivity. The results of the study may also foster broad-based spread of knowledge and innovation, which ultimately promotes the economic development process. Finally, the novel perspectives offered by this study hold value to critical cross-disciplinary research that lies at the nexus of marketing, public policy study, sociology, anthropology and behavioral and institutional economics.
