Networks of Relations and Social Capital

49 Pages Posted: 3 Oct 2005

See all articles by Steffen Lippert

Steffen Lippert

University of Auckland - Department of Economics

Giancarlo Spagnolo

Stockholm School of Economics (SITE); Centre for Economic Policy Research (CEPR); University of Rome 'Tor Vergata'; EIEF

Multiple version iconThere are 2 versions of this paper

Date Written: May 2005


We model networks of relational (or implicit) contracts, exploring how sanctioning power and equilibrium conditions change under different network configurations and information transmission technologies. In our model relations are the links, and the value of the network lies in its ability to enforce cooperative agreements that could not be sustained if agents had no access to other network members' sanctioning power and information. We identify conditions for network stability and in-network information transmission as well as conditions under which stable sub-networks inhibit more valuable larger networks. The model provides formal definitions for individual and communities' 'social capital' in the spirit of Coleman and Putnam.

Keywords: Networks, relational contracts, implicit contracts, industrial districts, indirect multimarket contact, cooperation, collusion, social capital, social relations, embeddedness, end-network effect, peering agreements

JEL Classification: D23, D43, L13, L29, O17

Suggested Citation

Lippert, Steffen and Spagnolo, Giancarlo, Networks of Relations and Social Capital (May 2005). CEPR Discussion Paper No. 5078, Available at SSRN:

Steffen Lippert

University of Auckland - Department of Economics ( email )

New Zealand

Giancarlo Spagnolo (Contact Author)

Stockholm School of Economics (SITE) ( email )

P.O. Box 6501

HOME PAGE: http://

Centre for Economic Policy Research (CEPR)

United Kingdom

University of Rome 'Tor Vergata' ( email )

Faculty of Economics - DEI
Via Columbia 2
Rome, RM 00133

EIEF ( email )

Via Due Macelli, 73
Rome, 00187


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