Social networks and non-market valuations

• Network structure matters when agents value both their own public good consumption and that of others in their network.
• Aggregate valuation increases when the network places more weight on individuals with higher valuations.
• The model identifies opinion leaders as those with the highest weight in the network.
• Public projects favored by opinion leaders tend to be favored by the network as a whole.

This paper considers the role of social networks in the non-market valuation of public goods. In the model individuals derive utility both from their own direct enjoyment of the public good and from the enjoyment of those in their network. We find that network structure almost always matters, both for utility and for valuation. The network increases aggregate valuation when it assigns higher importance, that is, stronger connections, to individuals with higher private values for the public good. The model provides a theoretical foundation for the idea of opinion leaders who have disproportionate influence over their communities. Specifically, opinion leaders are individuals assigned high importance by the network, and projects favored by opinion leaders tend to be favored by the network as a whole. The model can also guide future empirical studies by enabling a more structural approach to non-market valuation in a socially connected group.