Markus Kinateder, a professor from the Department of Economics at the School of Economics and Business Administration, has published the article “Public Goods in Endogenous Networks” in the US journal AEJ: Microeconomics. The publication is one of the world’s most influential academic journals and its articles address issues such as microeconomic theory, industrial organization and microeconomic aspects of international trade, economic policy and finance.

“Public Goods in Endogenous Networks” was co-written by Professor Kinateder and Luca Paolo Merlino, a professor at the Centre d’Économie de la Sorbonne.

The professor himself shows us a summary of his article “Public Goods in Endogenous Networks”, whose publication in the US journal AEJ: Microeconomics is imminent:

"The article Public Goods in Endogenous Networks (forthcoming in the American Economic Journal: Microeconomics) builds on the seminal paper of Galeotti and Goyal published in one of the top 5 journals in economics, the American Economic Review, in 2010. They are the first to study theoretically strategic interaction among players which choose both, an effort level and with whom to interact in a local public goods game. Our contribution is to extend their result to heterogeneous players which differ either in the cost of providing effort or in the valuation of the public good. Very surprisingly, while both sources of heterogeneity yield identical results in isolation (without network), they yield very different equilibrium network structures when the network is endogenous.

This result matters for empirical work since many situations resemble local public good games, such as, when different consumers gather information about products and consult each other on this information, or for example, when farmers decide how much fertilizer to use observing their neighbors’ use of it.

Apart from several other theoretically very relevant results, another important contribution of the paper is to show that the source of heterogeneity matters to determine whether inequality among the players increases or not. When players differ in their valuation of the public good, for example, because rich people want to consume more of it, then inequality in the population increases, while it decreases when players differ in the cost of providing it".