Social network and agency activity: Wage, efficiency and market mechanism

As a medium for communication and coalition, social network plays an important role in economic activities. This paper aims to study the influence of social network among merchants to agency activities by means of simulation based on corresponding game model. We find that if the average degree of the social network increases, the wage of agents will decrease and social efficiency will increase, but the probability of emergence of third-part institutions such as courts, which is the basis of modern market economy, will decrease. So we can come to the conclusion that the social network with high average degree can encourage the transactions between merchants and agents in short run, but it will restrain the emergence and development of modern market economy.