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Structural estimation of pairwise stable networks with nonnegative externality

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  • Miyauchi, Yuhei

Abstract

This paper develops a framework to structurally estimate pairwise stable networks with nonnegative externality. We characterize pairwise stable equilibria as a fixed point of a certain mapping and show that the set of pairwise stable equilibria with nonnegative externality is a complete lattice. We extend the characterization to an econometric framework for structural estimation based on the moment inequality model. We apply our methodology to friendship networks of students in the United States, using data from Add-Health. We find that the preference toward racial homophily is overestimated if we do not control for the preference toward clustering.

Suggested Citation

  • Miyauchi, Yuhei, 2016. "Structural estimation of pairwise stable networks with nonnegative externality," Journal of Econometrics, Elsevier, vol. 195(2), pages 224-235.
  • Handle: RePEc:eee:econom:v:195:y:2016:i:2:p:224-235
    DOI: 10.1016/j.jeconom.2016.08.001
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Bryan S. Graham, 2017. "An econometric model of network formation with degree heterogeneity," CeMMAP working papers CWP08/17, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
    2. Vincent Boucher, 2017. "The Estimation of Network Formation Games with Positive Spillovers," Cahiers de recherche 1710, Centre de recherche sur les risques, les enjeux économiques, et les politiques publiques.
    3. Philippe Bich & Lisa Morhaim, 2017. "On the existence of Pairwise stable weighted networks," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-01564591, HAL.

    More about this item

    Keywords

    Social networks; Network formation; Multiple equilibria; Pairwise stability; Lattice;

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation

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