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An empirical model for strategic network formation

Author

Listed:
  • Nicholas Christakis

    (Institute for Fiscal Studies)

  • James Fowler

    (Institute for Fiscal Studies)

  • Guido Imbens

    () (Institute for Fiscal Studies and Stanford Graduate School of Business)

  • Karthik Kalyanaraman

    (Institute for Fiscal Studies and American Enterprise Institute)

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 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.

Suggested Citation

  • Nicholas Christakis & James Fowler & Guido Imbens & Karthik Kalyanaraman, 2010. "An empirical model for strategic network formation," CeMMAP working papers CWP16/10, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
  • Handle: RePEc:ifs:cemmap:16/10
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    File URL: http://cemmap.ifs.org.uk/wps/cwp1610.pdf
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    References listed on IDEAS

    as
    1. Jackson, Matthew O. & Wolinsky, Asher, 1996. "A Strategic Model of Social and Economic Networks," Journal of Economic Theory, Elsevier, vol. 71(1), pages 44-74, October.
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    JEL classification:

    • C0 - Mathematical and Quantitative Methods - - General
    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics
    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General

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