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Multinomial choice with social interactions

  • Brock,W.A.
  • Durlauf,S.N.

    (University of Wisconsin-Madison, Social Systems Research Institute)

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 Wisconsin Madison - Social Systems in its series Working papers with number 1.

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Date of creation: 2003
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Handle: RePEc:att:wimass:20031
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  1. Charles F. Manski, 2000. "Economic Analysis of Social Interactions," Journal of Economic Perspectives, American Economic Association, vol. 14(3), pages 115-136, Summer.
  2. William A. Brock, 1993. "Pathways to randomness in the economy: Emergent nonlinearity and chaos in economics and finance," Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, vol. 8(1), pages 3-55.
  3. Donna Ginther & Robert Haveman & Barbara Wolfe, 2000. "Neighborhood Attributes as Determinants of Children's Outcomes: How Robust Are the Relationships?," Journal of Human Resources, University of Wisconsin Press, vol. 35(4), pages 603-642.
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  7. Brock, W.A. & Durlauf, S.N., 1997. "A Formal Model of Theory Vhoice in Science," Working papers 9707, Wisconsin Madison - Social Systems.
  8. C. Monica Capra & Charles A. Holt, 1999. "Coordination," Southern Economic Journal, Southern Economic Association, vol. 65(3), pages 630-636, January.
  9. William Brock & Steven N. Durlauf, 2000. "Interactions-Based Models," NBER Technical Working Papers 0258, National Bureau of Economic Research, Inc.
  10. Yannis M. Ioannides & Jeffrey E. Zabel, 2000. "Neighborhood Effects and Housing Demand," Discussion Papers Series, Department of Economics, Tufts University 0012, Department of Economics, Tufts University.
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  13. Edward L. Glaeser & Bruce Sacerdote & José A. Scheinkman, 1996. "Crime and Social Interactions," The Quarterly Journal of Economics, Oxford University Press, vol. 111(2), pages 507-548.
  14. Brock,W.A. & Durlauf,S.N., 2000. "Discrete choice with social interactions," Working papers 7, Wisconsin Madison - Social Systems.
  15. Cooper,Russell, 1999. "Coordination Games," Cambridge Books, Cambridge University Press, number 9780521570176, November.
  16. Glenn C. Loury, 1976. "A Dynamic Theory of Racial Income Differences," Discussion Papers 225, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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  20. Lundberg, S.J.Startz, R., 1994. "On the Persistence of Racial Inequality," Working Papers 94-07, University of Washington, Department of Economics.
  21. repec:dgr:rugccs:200214 is not listed on IDEAS
  22. Francis Vella, 1998. "Estimating Models with Sample Selection Bias: A Survey," Journal of Human Resources, University of Wisconsin Press, vol. 33(1), pages 127-169.
  23. Datcher, Linda P, 1982. "Effects of Community and Family Background on Achievement," The Review of Economics and Statistics, MIT Press, vol. 64(1), pages 32-41, February.
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  25. Dubin, Jeffrey A & McFadden, Daniel L, 1984. "An Econometric Analysis of Residential Electric Appliance Holdings and Consumption," Econometrica, Econometric Society, vol. 52(2), pages 345-62, March.
  26. Hoff, Karla & Sen, Arijit, 2004. "Homeownership, community interactions, and segregation," Policy Research Working Paper Series 3316, The World Bank.
  27. William A. Brock & Steven N. Durlauf, 2002. "A Multinomial-Choice Model of Neighborhood Effects," American Economic Review, American Economic Association, vol. 92(2), pages 298-303, May.
  28. Roland Benabou, 1993. "Workings of a City: Location, Education, and Production," The Quarterly Journal of Economics, Oxford University Press, vol. 108(3), pages 619-652.
  29. R. D. Plotnick & S. D. Hoffman, . "The Effect of Neighborhood Characteristics on Young Adult Outcomes: Alternative Estimates," Institute for Research on Poverty Discussion Papers 1106-96, University of Wisconsin Institute for Research on Poverty.
  30. Roland Bénabou, 1996. "Equity and Efficiency in Human Capital Investment: The Local Connection," Review of Economic Studies, Oxford University Press, vol. 63(2), pages 237-264.
  31. Arrow, Kenneth J, 1994. "Methodological Individualism and Social Knowledge," American Economic Review, American Economic Association, vol. 84(2), pages 1-9, May.
  32. Graham, Bryan S. & Hahn, Jinyong, 2005. "Identification and estimation of the linear-in-means model of social interactions," Economics Letters, Elsevier, vol. 88(1), pages 1-6, July.
  33. Lawrence F. Katz & Jeffrey R. Kling & Jeffrey B. Liebman, 2000. "Moving to Opportunity in Boston: Early Results of a Randomized Mobility Experiment," NBER Working Papers 7973, National Bureau of Economic Research, Inc.
  34. Schmertmann, Carl P., 1994. "Selectivity bias correction methods in polychotomous sample selection models," Journal of Econometrics, Elsevier, vol. 60(1-2), pages 101-132.
  35. Cooper,Russell, 1999. "Coordination Games," Cambridge Books, Cambridge University Press, number 9780521578967, November.
  36. Daniel McFadden, 1977. "Modelling the Choice of Residential Location," Cowles Foundation Discussion Papers 477, Cowles Foundation for Research in Economics, Yale University.
  37. Borsch-Supan, Axel, 1990. "On the compatibility of nested logit models with utility maximization," Journal of Econometrics, Elsevier, vol. 43(3), pages 373-388, March.
  38. Mary Corcoran & Roger Gordon & Deborah Laren & Gary Solon, 1992. "The Association between Men's Economic Status and Their Family and Community Origins," Journal of Human Resources, University of Wisconsin Press, vol. 27(4), pages 575-601.
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