Heterogeneity, incomplete information and efficiency: a longitudinal study of a students’ network

Abstract

Abstract There is a considerable body of evidence showing that ties between actors are not random but are formed endogenously to maximise individual benefits. Such preferential attachment may be difficult if information is incomplete; in such cases, repeated interaction with the same set of agents may facilitate the identification of actors with whom forming ties is beneficial. The present study examines the formation of ties in a heterogeneous community characterised by incomplete information about the endowments of actors. Data was obtained through an online survey from students enrolled in the post-graduation programme in the department of Economics, Presidency University, and analysed using social network analysis tools and concepts. Results revealed that, over time, the density, reachability and connectivity of the network increased. Greater interaction among actors facilitated the identification of high value actors, and led to an efficient and stable network—but at the cost of polarisation within the network. The study concludes by arguing the need to supplement the analysis of efficiency and stability with an enquiry into the normative implications of polarisation. JEL classification: D85, I29