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The Estimation of Network Formation Games with Positive Spillovers

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  • Vincent Boucher

Abstract

I present a behavioural model of network formation with positive network externalities in which individuals have preferences for being part of a clique. The behavioural model leads to an associated supermodular (Topkis, 1979) normalform game. I show that the behavioural model converges to the greatest Nash equilibrium of the associated normal-form game. I propose an approximate Bayesian computation (ABC) framework, using original summary statistics, to make inferences about individuals' preferences, and provide an illustration using data on high school friendships.

Suggested Citation

  • 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.
  • Handle: RePEc:lvl:crrecr:1710
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    References listed on IDEAS

    as
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    Cited by:

    1. Gualdani, Cristina, 2018. "An Econometric Model of Network Formation with an Application to Board Interlocks between Firms," TSE Working Papers 17-898, Toulouse School of Economics (TSE), revised Jul 2019.
    2. Gualdani, Cristina, 2021. "An econometric model of network formation with an application to board interlocks between firms," Journal of Econometrics, Elsevier, vol. 224(2), pages 345-370.
    3. Leung, Michael P., 2019. "A weak law for moments of pairwise stable networks," Journal of Econometrics, Elsevier, vol. 210(2), pages 310-326.

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    More about this item

    Keywords

    Network formation; Supermodular Games; Approximate Bayesian Computation;
    All these keywords.

    JEL classification:

    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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