Clustering, Cooperation, and Search in Social Networks

The paper discusses the important role of clustering in the evolution of social networks, as it affects not only the incentives of players to cooperate but also their ability to search for fresh opportunities. Depending on the volatility of the environment and the social convention in place, we show that network clustering endogenously adapts to achieve and maintain, to the extent possible, a state of high social connectivity in the long run. (JEL: C71, D83, D85) Copyright (c) 2005 The European Economic Association.