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Discrete Choice with Social Interactions and Endogenous Memberships

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  • Giulio Zanella

Abstract

This paper is about selection of neighbors in models of social interactions. I study a general equilibrium model of behavior subject to endogenous social influences when heterogeneous individuals can choose whom to associate with, buying associations on a "memberships market". Social effects in behavior turn out to be a stratifying force: The desire for valuable interactions induces inefficient sorting and may lead to the endogenous emergence of "social traps" . The theory is then used to suggest identification strategies that may solve, in a microfounded way, identification and selection problems that typically affect empirical work on social interactions. Such strategies offer a viable alternative when valid instrumental variables or randomized experiments are not available. (JEL: C26, D85, Z13, Z19) (c) 2007 by the European Economic Association.

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Bibliographic Info

Article provided by MIT Press in its journal Journal of the European Economic Association.

Volume (Year): 5 (2007)
Issue (Month): 1 (03)
Pages: 122-153

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Handle: RePEc:tpr:jeurec:v:5:y:2007:i:1:p:122-153

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Cited by:
  1. Gioia De Melo, 2014. "Peer Effects Identified Through Social Networks: Evidence from Uruguayan Schools," Working Papers 2014-05, Banco de México.
  2. Onur Ozgur & Alberto Bisin, 2011. "Dynamic linear economies with social interactions," Levine's Working Paper Archive 786969000000000036, David K. Levine.
  3. Yannis M. Ioannides & Giulio Zanella, 2008. "Searching for the Best Neighborhood: Mobility and Social Interactions," Department of Economics University of Siena 533, Department of Economics, University of Siena.
  4. Christian Ghiglino & Sanjeev Goyal, 2008. "Keeping up with the neighbours: social interaction in a market economy," Economics Discussion Papers 655, University of Essex, Department of Economics.
  5. Ethan Cohen-Cole & Burcu Duygan-Bump, 2008. "Household bankruptcy decision: the role of social stigma vs. information sharing," Risk and Policy Analysis Unit Working Paper QAU08-6, Federal Reserve Bank of Boston.
  6. ÖZGÜR, Onur & BISIN, Alberto, 2011. "Dynamic Linear Economies with Social Interactions," Cahiers de recherche 04-2011, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
  7. Ethan Cohen-Cole & Giulio Zanella, 2008. "Welfare Stigma or Information Sharing? Decomposing Social Interactions Effects in Social Benefit Use," Department of Economics University of Siena 531, Department of Economics, University of Siena.

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