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An econometric model of network formation with an application to board interlocks between firms

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  • Gualdani, Cristina

Abstract

We study identification of the players’ preferences in a network formation game featuring complete information, nonreciprocal links, and a spillover effect. We decompose the network formation game into local games such that the network formation game is in equilibrium if and only if each local game is in equilibrium. This decomposition helps us prove equilibrium existence, reduce the number of moment inequalities characterising the identified set, and simplify the calculation of the integrals entering those moment inequalities. The developed methodology is used to investigate Italian firms’ incentives for having their executive directors sitting on competitors’ boards.

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  • Gualdani, Cristina, 2021. "An econometric model of network formation with an application to board interlocks between firms," Journal of Econometrics, Elsevier, vol. 224(2), pages 345-370.
    • Handle: RePEc:eee:econom:v:224:y:2021:i:2:p:345-370
    DOI: 10.1016/j.jeconom.2019.08.015
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    Cited by:

    1. Candelaria, Luis E. & Ura, Takuya, 2023. "Identification and inference of network formation games with misclassified links," Journal of Econometrics, Elsevier, vol. 235(2), pages 862-891.
    2. Christian Bontemps & Cristina Gualdani & Kevin Remmy, 2023. "Price Competition and Endogenous Product Choice in Networks: Evidence From the US Airline Industry," CRC TR 224 Discussion Paper Series crctr224_2023_400, University of Bonn and University of Mannheim, Germany.
    3. St'ephane Bonhomme & Kevin Dano, 2023. "Functional Differencing in Networks," Papers 2307.11484, arXiv.org.

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    More about this item

    Keywords

    Network formation; Multiple equilibria; Partial identification; Board interlocks;
    All these keywords.

    JEL classification:

    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
    • C57 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Econometrics of Games and Auctions
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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