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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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File URL: http://www.ssc.wisc.edu/econ/archive/wp2003-01.pdf
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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
Date of revision:
Handle: RePEc:att:wimass:20031
Contact details of provider: Postal: UNIVERSITY OF WISCONSIN MADISON, SOCIAL SYSTEMS RESEARCH INSTITUTE(S.S.R.I.), MADISON WISCONSIN 53706 U.S.A.

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  7. Brock,W.A. & Durlauf,S.N., 2002. "A multinomial choice model of neighborhood effects," Working papers 4, Wisconsin Madison - Social Systems.
  8. Kooreman, Peter & Soetevent, Adriaan, 2002. "A discrete choice model with social interactions: an analysis of high school teen behavior," CCSO Working Papers 200214, University of Groningen, CCSO Centre for Economic Research.
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  14. repec:att:wimass:9707 is not listed on IDEAS
  15. 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.
  16. William Brock & Steven N. Durlauf, 2000. "Interactions-Based Models," NBER Technical Working Papers 0258, National Bureau of Economic Research, Inc.
  17. Dennis Epple & Holger Sieg, 1999. "Estimating Equilibrium Models of Local Jurisdictions," Journal of Political Economy, University of Chicago Press, vol. 107(4), pages 645-681, August.
  18. Lundberg, Shelly & Startz, Richard, 1998. "On the Persistence of Racial Inequality," Journal of Labor Economics, University of Chicago Press, vol. 16(2), pages 292-323, April.
  19. Durlauf, Steven N, 1996. " A Theory of Persistent Income Inequality," Journal of Economic Growth, Springer, vol. 1(1), pages 75-93, March.
  20. 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.
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  29. 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.
  30. Anna Aizer & Janet Currie, 2002. "Networks or Neighborhoods? Correlations in the Use of Publicly-Funded Maternity Care in California," NBER Working Papers 9209, National Bureau of Economic Research, Inc.
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