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Linear Social Interactions Models

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Author Info

  • Blume, Lawrence E.

    (Department of Economics, Cornell University, Ithaca, USA, and Santa Fe Institute and IHS Vienna)

  • Brock, William A.

    (Economics Department, University of Wisconsin-Madison, USA and University of Missouri, Columbia)

  • Durlauf, Steven N.

    (Department of Economics, University of Wisconsin-Madison, USA)

  • Jayaraman, Rajshri

    (European School of Management and Technology, Berlin, Germany)

Abstract

This paper provides a systematic analysis of identification in linear social interactions models. This is both a theoretical and an econometric exercise as the analysis is linked to a rigorously delineated model of interdependent decisions. We develop an incomplete information game that describes individual choices in the presence of social interactions. The equilibrium strategy profiles are linear. Standard models in the empirical social interactions literature are shown to be exact or approximate special cases of our general framework, which in turn provides a basis for understanding the microeconomic foundations of those models. We consider identification of both endogenous (peer) and contextual social effects under alternative assumptions on a priori information about network structure available to an analyst, and contrast the informational content of individual-level and aggregated data. Finally, we discuss potential ramifications for identification of endogenous group selection and differences between the information sets of analysts and agents.

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File URL: http://www.ihs.ac.at/publications/eco/es-298.pdf
File Function: First version, 2013
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Bibliographic Info

Paper provided by Institute for Advanced Studies in its series Economics Series with number 298.

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Length: 55 pages
Date of creation: Jun 2013
Date of revision:
Handle: RePEc:ihs:ihsesp:298

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Keywords: Social interactions; identification; incomplete information games;

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  1. Ivar Ekeland & James Heckman & Lars Nesheim, 2002. "Identification and estimation of hedonic models," CeMMAP working papers CWP07/02, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
  2. Mari Rege & Kjetil Telle & Mark Votruba, 2007. "Social Interaction Effects in Disability Pension Participation. Evidence from Plant Downsizing," Discussion Papers 496, Research Department of Statistics Norway.
  3. Charles F. Manski & Joram Mayshar, 2003. "Private Incentives and Social Interactions: Fertility Puzzles in Israel," Journal of the European Economic Association, MIT Press, vol. 1(1), pages 181-211, 03.
  4. Ryo Nakajima, 2004. "Measuring Peer Effects on Youth Smoking Behavior," ISER Discussion Paper 0600, Institute of Social and Economic Research, Osaka University.
  5. D'Haultfoeuille, Xavier & Davezies, Laurent & Fougère, Denis, 2006. "Identification of Peer Effects Using Group Size Variation," CEPR Discussion Papers 5865, C.E.P.R. Discussion Papers.
  6. Edward L. Glaeser & Bruce Sacerdote & Jose A. Scheinkman, 1995. "Crime and Social Interactions," NBER Working Papers 5026, National Bureau of Economic Research, Inc.
  7. Epple, Dennis & Romano, Richard E, 1998. "Competition between Private and Public Schools, Vouchers, and Peer-Group Effects," American Economic Review, American Economic Association, vol. 88(1), pages 33-62, March.
  8. Bruce Sacerdote, 2001. "Peer Effects With Random Assignment: Results For Dartmouth Roommates," The Quarterly Journal of Economics, MIT Press, vol. 116(2), pages 681-704, May.
  9. Manski, Charles F, 1993. "Identification of Endogenous Social Effects: The Reflection Problem," Review of Economic Studies, Wiley Blackwell, vol. 60(3), pages 531-42, July.
  10. Timothy G. Conley & Christopher R. Udry, 2005. "Learning about a new technology: pineapple in Ghana," Proceedings, Federal Reserve Bank of San Francisco.
  11. Lee, Lung-fei, 2007. "Identification and estimation of econometric models with group interactions, contextual factors and fixed effects," Journal of Econometrics, Elsevier, vol. 140(2), pages 333-374, October.
  12. Robert Bifulco & Jason M. Fletcher & Stephen L. Ross, 2011. "The Effect of Classmate Characteristics on Post-secondary Outcomes: Evidence from the Add Health," American Economic Journal: Economic Policy, American Economic Association, vol. 3(1), pages 25-53, February.
  13. Henderson, Vernon & Mieszkowski, Peter & Sauvageau, Yvon, 1978. "Peer group effects and educational production functions," Journal of Public Economics, Elsevier, vol. 10(1), pages 97-106, August.
  14. McManus, Douglas A., 1992. "How common is identification in parametric models?," Journal of Econometrics, Elsevier, vol. 53(1-3), pages 5-23.
  15. Piero Cipollone & Alfonso Rosolia, 2007. "Social Interactions in High School: Lessons from an Earthquake," American Economic Review, American Economic Association, vol. 97(3), pages 948-965, June.
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