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Multinomial Choice with Social Interactions

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Author Info
William A. Brock
Steven N. Durlauf

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Abstract

This paper develops a model of individual decisionmaking in the presence of social interactions when the number of available choices is finite. We show how a multinomial logit model framework may be used to model such decisions in a way that permits a tight integration of theory and econometrics. Conditions are given under which aggregate choice behavior in a population exhibits multiple self-consistent equilibria. An econometric version of the model is shown to be identified under relatively weka conditions. That analysis is extended to allow for general error distributions and some preliminary ways to account for the endogeneity of group memberships are developed.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Technical Working Papers with number 0288.

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Date of creation: Mar 2003
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Handle: RePEc:nbr:nberte:0288

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Find related papers by JEL classification:
C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models
C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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Cited by:
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  1. Moscone, Francesco & Tosetti, Elisa & Vittadini, Giorgio, 2009. "Social Interaction in Patients'’Hospital Choice: Evidences from Italy," MPRA Paper 17783, University Library of Munich, Germany. [Downloadable!]
  2. Anne Bolster & Simon Burgess & Ron Johnston & Kelvyn Jones & Carol Propper & Rebecca Sarker, 2004. "Neighbourhoods, Households and Income Dynamics: A Semi-Parametric Investigation of Neighbourhood Effects," The Centre for Market and Public Organisation 04/106, Department of Economics, University of Bristol, UK. [Downloadable!]
    Other versions:
  3. van Ham, Maarten & Manley, David, 2009. "The Effect of Neighbourhood Housing Tenure Mix on Labour Market Outcomes: A Longitudinal Perspective," IZA Discussion Papers 4094, Institute for the Study of Labor (IZA). [Downloadable!]
  4. Yann Bramoullé & Habiba Djebbari & Bernard Fortin, 2007. "Identification of Peer Effects through Social Networks," Cahiers de recherche 0705, CIRPEE. [Downloadable!]
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  5. Carla Sá & Raymond Florax & Piet Rietveld, 2007. "Living-arrangement and university decisions of Dutch young adults," NIPE Working Papers 14/2007, NIPE - Universidade do Minho. [Downloadable!]
  6. Henry Overman, 2003. "Can We Learn Anything from Economic Geography Proper?," CEP Discussion Papers dp0586, Centre for Economic Performance, LSE. [Downloadable!]
    Other versions:
  7. repec:att:wimass:1920328 is not listed on IDEAS
  8. Giulio Zanella, 2004. "Discrete Choice with Social Interactions and Endogenous Memberships," Department of Economics University of Siena 442, Department of Economics, University of Siena. [Downloadable!]
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  9. Wilbert Grevers & Anne Veen Van Der, 2006. "Optimal Land Use and the Allocation of Endogenous Amenities," ERSA conference papers ersa06p522, European Regional Science Association. [Downloadable!]
  10. Florence Goffette-Nagot & Claire Dujardin, 2005. "Neighborhood effects, public housing and unemployment in France," Working Papers 0505, Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure. [Downloadable!]
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  11. Wilbert Grevers & Anne Van der Veen, 2005. "Welfare Economic Aspects of Land Use Planning," ERSA conference papers ersa05p386, European Regional Science Association. [Downloadable!]
  12. Patrick Bayer & Robert McMillan & Kim Rueben, 2004. "An Equilibrium Model of Sorting in an Urban Housing Market," NBER Working Papers 10865, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  13. Iyer, S. & Weeks, M., 2004. "Multiple Social Interaction and Reproductive Externalities: An Investigation of Fertility Behaviour in Kenya," Cambridge Working Papers in Economics 0461, Faculty of Economics, University of Cambridge. [Downloadable!]
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