Networks, Markets, and Inequality: Comment

Gagnon and Goyal (2017) develop an elegant model to understand the interaction between community and markets. One key argument is that, among others, whether markets and social ties are substitutes or complements plays a decisive role: markets undermine social ties in the case of substitutes and markets strengthen social ties in the case of complements. However, they do not provide any formal result to underpin this argument. We underpin their argument with a formal result. We find that an independence among returns to markets, returns to networks, and the degree of complementarity between network and market actions, which is missed by Gagnon and Goyal (2017), is crucial to derive this result, as well as several comparative statics results of Gagnon and Goyal (2017).