Social Capital in Social Networks

Abstract

We deflne and measure social capital within a large social network where agents take actions which have externalities on other agents. Our concept of social capital measures the extent to which agents are able to internalize these externalities. We distinguish between preference-based social capital (directed altruism) and cooperative social capital based on repeated interaction between pairs or groups of agents. We flnd that preference-based social capital increases an agent’s weight on a friend’s utility by about 15 percent and cooperative social capital adds another 5 percent.