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An Empirical Model for Strategic Network Formation

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  • Nicholas A. Christakis
  • James H. Fowler
  • Guido W. Imbens
  • Karthik Kalyanaraman

Abstract

We develop and analyze a tractable empirical model for strategic network formation that can be estimated with data from a single network at a single point in time. We model the network formation as a sequential process where in each period a single randomly selected pair of agents has the opportunity to form a link. Conditional on such an opportunity, a link will be formed if both agents view the link as beneficial to them. They base their decision on their own characateristics, the characteristics of the potential partner, and on features of the current state of the network, such as whether the two potential partners already have friends in common. A key assumption is that agents do not take into account possible future changes to the network. This assumption avoids complications with the presence of multiple equilibria, and also greatly simplifies the computational burden of anlyzing these models. We use Bayesian markov-chain-monte-carlo methods to obtain draws from the posterior distribution of interest. We apply our methods to a social network of 669 high school students, with, on average, 4.6 friends. We then use the model to evaluate the effect of an alternative assignment to classes on the topology of the network.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 16039.

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Date of creation: May 2010
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Handle: RePEc:nbr:nberwo:16039

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Cited by:
  1. Riccardo Crescenzi & Max Nathan & Andrés Rodríguez-Pose, 2014. "Do Inventors Talk to Strangers? On Proximity and Collaborative Knowledge Creation," SERC Discussion Papers, Spatial Economics Research Centre, LSE 0153, Spatial Economics Research Centre, LSE.
  2. Marc Henry & Ismael Mourifie, 2011. "Euclidean Revealed Preferences: Testing the Spatial Voting Model," CIRJE F-Series, CIRJE, Faculty of Economics, University of Tokyo CIRJE-F-822, CIRJE, Faculty of Economics, University of Tokyo.
  3. Jeremy T. Fox & Chenyu Yang, 2012. "Unobserved Heterogeneity in Matching Games," NBER Working Papers 18168, National Bureau of Economic Research, Inc.
  4. Angelo Mele, 2010. "A Structural Model of Segregation in Social Networks," Working Papers, NET Institute 10-16, NET Institute.
  5. Bryan S. Graham, 2014. "An Empirical Model of Network Formation: Detecting Homophily When Agents Are Heterogenous," NBER Working Papers 20341, National Bureau of Economic Research, Inc.

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