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Social Networking and Individual Outcomes Beyond the Mean Field Case

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  • Yannis M. Ioannides
  • Adriaan R. Soetevent

Abstract

This paper examines social interactions when social networking is endogenous. It employs a linear-quadratic model that accommodates contextual effects, and endogenous local inter- actions, that is where individuals react to the decisions of their neighbors, and endogenous global ones, where individuals react to the mean decision in the economy, both with a lag. Unlike the simple V AR(1) structural model of individual interactions, the planner's problem here involves intertemporal optimization and leads to a system of linear difference equations with expectations. It highlights an asset-like property of socially optimal outcomes in every period which helps characterize the shadow values of connections among agents. Endogenous networking is easiest to characterize when individuals choose weights of social attachment to other agents. It highlights a simultaneity between decisions and patterns of social at- tachment. The paper also poses the inverse social interactions problem, asking whether it is possible to design a social network whose agents' decisions will obey an arbitrarily specified variance covariance matrix.

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Bibliographic Info

Paper provided by Department of Economics, Tufts University in its series Discussion Papers Series, Department of Economics, Tufts University with number 0521.

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Date of creation: 2005
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Handle: RePEc:tuf:tuftec:0521

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Related research

Keywords: Social Interactions; Social Networks; Neighborhood Effects; Endogenous Net- working; Social Intermediation; Econometric Identification; Strong versus Weak Ties; Value of Social Connections.;

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Citations

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Cited by:
  1. Darlene C. Chisholm & Margaret S. McMillan & George Norman, 2006. "Product Differentiation and Film Programming Choice: Do First-Run Movie Theatres Show the Same Films?," NBER Working Papers 12646, National Bureau of Economic Research, Inc.
  2. Cabrales, Antonio & Calvó-Armengol, Antoni & Zenou, Yves, 2011. "Social interactions and spillovers," Games and Economic Behavior, Elsevier, vol. 72(2), pages 339-360, June.
  3. Yann Bramoullé & Habiba Djebbari & Bernard Fortin, 2007. "Identification of Peer Effects through Social Networks," Cahiers de recherche 0705, CIRPEE.
  4. Darlene Chisholm & George Norman, 2005. "When to Exit a Product: Evidence from the U.S. Motion-Pictures Exhibition Market," Discussion Papers Series, Department of Economics, Tufts University 0522, Department of Economics, Tufts University.
  5. Gilbert E. Metcalf & Jongsang Park, 2005. "A Comment on the Role of Prices for Excludable Public Goods," Discussion Papers Series, Department of Economics, Tufts University 0524, Department of Economics, Tufts University.
  6. Grajzl, Peter & Baniak, Andrzej, 2012. "Mandating behavioral conformity in social groups with conformist members," Journal of Economic Behavior & Organization, Elsevier, vol. 82(2), pages 479-493.
  7. Ulrich Horst, 2010. "Dynamic Systems of Social Interactions," SFB 649 Discussion Papers SFB649DP2010-012, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
  8. Yannis M. Ioannides, 2005. "Random Graphs and Social Networks: An Economics Perspective," Discussion Papers Series, Department of Economics, Tufts University 0518, Department of Economics, Tufts University.

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