• KDI Journal of Economic Policy
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• v.36 no.2
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• pp.175-196
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• 2014

This paper is a theoretical attempt to analyze and understand Yeonjulmang and Yeongyeolmang, which are terms for social networks with negative and positive connotation respectively in Korean Sociology. To do that, we analyze a social network where unilateral help are reciprocated. A social network in this context is a network where the past behaviors of its members are transmitted. With the information how the members behaved before, a social norm can emerge in the network, which facilitate the indirect reciprocation of unilateral help. In this norm, an agent's helping now will be rewarded by his being helped in the future. Since the reward happens in the future, this norm may not be sustained even if it is efficient. To sustain the reciprocation of the help, a norm can evolve to punish the violation of the norm more severely. If the punishment becomes too severe, the reciprocation of the help can be sustained even if it is not efficient any more in that the cost of help exceeds the benefit. If we allow the exit of the network, members have incentive to do it as belonging to the network is not beneficial any more. Then the social network may collapse. To avoid the collapse of the network, the exclusive norm, which exclude even mutually beneficial relationship with outsiders, may emerge. This can explain the emergence of Yeonjulmang, or a closed network, which is inefficient in double senses; 1) it may sustain inefficient reciprocation of help, and 2) the mutually beneficial relationship is excluded between an insider and an outsider of the network.