The Law of the Few
|Speaker:||Andrea Galeotti, University of Essex|
|Date:||Friday 5 October 2007|
|Location:||Lecture Room D, Streatham Court|
with Sanjeev Goyal
The Law of the Few - The law of the few refers to the following empirical phenomenon: in social groups a very small subset of individuals invests in collecting information while the rest of the group invests in forming connections with this select few. In many instances, there are no observable differences in characteristics between those who invest in information and those who invest in forming connections. This paper shows that the law of few naturally emerges in environments with identical rational agents. We develop a strategic game in which players have the opportunity to invest in collecting information as well as in investing in bilateral connections with others. We find that every strict equilibrium of this game exhibits the ‘law of the few’. We also show that this pattern of social differentiations is efficient in some cases.