Structural Holes, Innovation and the Distribution of Ideas

We model knowledge diffusion in a population of agents situated on a network, interacting only over direct ties. Some agents are by nature traders, others are by nature "givers": traders demand a quid pro quo for information transfer; givers do not. We are interested in efficiency of diffusion and explore the interplay between the structure of the population (proportion of traders), the network structure (clustering, path length and degree distribution), and the scarcity of knowledge. We find that at the global level, trading (as opposed to giving) reduces efficiency. At the individual level, highly connected agents do well when knowledge is scarce, agents in clustered neighbourhoods do well when it is abundant. The latter finding is connected to the debate on structural holes and social capital.Innovation, Diffusion of Innovations, Knowledge, Information, Networks

Information Technology and the Dynamics of Joint Innovation

We develop a model of an innovative industry to examine how information technology, by both enhancing matching efficiency and knowledge sharing, can have an ambiguous effect on the total amount of innovation. We consider a population of firms holding different knowledge expertise, and forming partnerships to conduct joint R&D. We assume that bringing together different expertise has positive value for innovating but also that joint innovation implies a partial convergence of the partners'' expertise. We study how the distribution of firms changes and thus how the innovative potential of the economy evolves. We show that as heterogeneity is used as an input by the innovative process, the industry must eventually collapse to a unique expertise, but how fast this takes place depends on the quality of IT. As a result of falling dispersion, a tension arises between static and dynamic efficiency. JEL Classification Numbers: C78,O33,O38.mathematical economics and econometrics ;

Social Sorting

This paper is about the behaviour of a society in which learning individuals play a Prisoner’s Dilemma that guides social promotion and demotion. The direct effect of the payoff-based socialization that is implemented here is segregation. However, segregation permits the survival of cooperation as it (unintendedly) preserves cooperators from detrimental interactions with defectors. Very large amounts of cooperation can be observed in the long run.microeconomics ;

Fits and Misfits: Technological Matching and R&D Networks

This paper presents an economic model of R&D network formation through the creation of strategic alliances. Firms are randomly endowed with knowledge elements. They base their alliance decisions purely on the technological fit of potential partners, ignoring social capital considerations and indirect benefits on the network. This is sufficient to generate equilibrium networks with the small world properties of observed alliance networks, namely short pairwise distances and local clustering. The equilibrium networks are more clustered than "comparable" random graphs, while they have similar characteristic path length. Two extreme regimes of competition are examined, to show that while the competition has a quantitative effect on the equilibrium networks (density is lower with competition), the small world features of the equilibrium networks are preserved.network formation, small worlds, R&D networks, strategic alliances, business clusters

Tax Evasion and Trust

Tax evasion is typically analyzed in a principal/agent framework, the government (principal) trying to provide agents with the incentives to pay their taxes. However, evading sales, excise or trade taxes requires the cooperation of at least two taxpayers. When individuals evade taxes, they face two potential costs. One is that tax evasion may be detected and sanctioned; the other is that their partner in crime might cheat. An increase in the sanction for tax evasion leads to a direct increase in the expected cost of a transaction in the illegal sector. However, it may also reduce the incentive to cheat. It may then be that a small increase in the sanction reduces the total cost of transacting in the illegal sector. Tax evasion may increase as a result. Il est habituel d'analyser l'évasion fiscale dans le cadre de modèles principal-agent, le gouvernement jouant le rôle du principal et le payeur de taxe potentiel celui de l'agent. Pourtant, l'évasion fiscale n'est fréquemment possible que si plusieurs agents coopèrent ensemble. Une telle coopération est par exemple nécessaire pour l'évasion des taxes de vente et d'assise. Lorsque plusieurs agents décident d'un commun accord de ne pas payer une taxe, ils doivent prendre deux coûts en considération. Le premier est que malgré tous leurs efforts pour que leurs activités d'évasion demeurent secrètes, il est possible qu'elles soient détectées et qu'ils soient sanctionnés. Le second est que le ou les partenaires peuvent ne pas fournir l'effort attendu (i.e. tricher) pour que les activités demeurent secrètes, augmentant alors la probabilité de détection. Une augmentation de la sanction pour évasion fiscale a alors deux effets. Elle augmente tout d'abord, de façon directe, le coût espéré de transiger illégalement. Mais elle peut également réduire l'incitation à tricher des partenaires impliqués dans une transaction illégale. En conséquence, un accroissement de la sanction peut réduire le coût total de certaines transactions illégales et mener à une augmentation de l'évasion fiscale.Tax Evasion, Cooperation, Sanctions

Anomalous photon diffusion in atomic vapors

The multiple scattering of photons in a hot, resonant, atomic vapor is investigated and shown to exhibit a L\'evy Flight-like behavior. Monte Carlo simulations give insights into the frequency redistribution process that originates the long steps characteristic of this class of random walk phenomena

Networks as Emergent Structures from Bilateral Collaboration

In this paper we model the formation of innovation networks as they emerge from bilateral actions. The effectiveness of a bilateral collaboration is determined by cognitive, relational and structural embeddedness. Innovation results from the recombination of knowledge held by the partners to the collaboration, and the extent to which agents’ knowledge complement each others is an issue of cognitive embeddedness. Previous collaborations (relational embeddedness) increase the probability of a successful collaboration; as does information gained from common third parties (structural embeddedness). As a result of repeated alliance formation, a network emerges whose properties are studied, together with those of the process of knowledge creation. Two features are central to the innovation process: how agents pool their knowledge resources; and how agents derive information about potential partners. We focus on the interplay between these two dimensions, and find that they both matter. The networks that emerge are not random, but in certain parts of the parameter space have properties of small worlds. (JEL Classification: L14, Z13, O3 Keywords: Networks, Innovation, Network Formation, Knowledge)industrial organization ;

On the creation of networks and knowledge

This paper examines the evolution of networks when innovation takes place as a result of agents bringing together their knowledge endowments. Agents freely form pairs creating a globally stable matching. paired agents combine their existing knowledge to create new knowledge. We study the properties of the dynamic network formed by these interactions, and the resultant knowledge dynamics. Each agent carries an amount of knowledge of a certain type, and the innovative output of a pair is a function of the partners'' endowments and types. We find evidence that the pattern of substitution between quantity and type of knowledge in the innovation function is vital in determining the growth of knowledge, the emergence of expertise and the stability of a number of network structures. Network structure itself exhibits a phase change when the relative importance of diversity compared to quantity increases beyond a threshold value.economics of technology ;

Merit, Approbation and the Evolution of Social Structure

In this paper we study a society in which individuals gain utility from income and from social approbation. Income is correlated with class. Approbation is given to an unobservable trait, which must be signalled through the agent’s social mobility, i.e. class change. Mobility is driven by a simple mechanism involving inheritance, effort and ability. Thus social structure (class composition) is affected by individuals’ quest for approbation, and we study how that affects the emergence and multiplicity of long run social organizations, including hybrid forms of dynasties and meritocracies. Specifically we observe that even though social mobility is driven purely by a meritocratic mechanism, pure dynasties can emerge. We then introduce a feedback between the size of the upper class and its income value, so that effort levels and social structure are jointly endogenous. We derive results on equilibrium effort levels and stationary (when they exist) social structures. Social organization can converge to a unique steady state, multiple long run equilibria or cycles.Economics of Technology;

If the Alliance Fits . . . : Innovation and Network Dynamics.

Network formation is often said to be driven by social capital considerations. A typical pattern observed in the empirical data on strategic alliances is that of small world networks: dense subgroups of firms interconnected by (few) clique-spanning ties. The typical argument is that there is social capital value both to being embedded in a dense cluster, and to bridging disconnected clusters. In this paper we develop and analyze a simple model of joint innovation where we are able to reproduce these features, based solely on the assumption that successful partnering demands some intermediate amount of similarity between the partners.