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Linear Social Interactions Models

  • Lawrence E. Blume
  • William A. Brock
  • Steven N. Durlauf
  • Rajshri Jayaraman

This paper provides a systematic analysis of identification in linear social interactions models. This is both a theoretical and an econometric exercise as the analysis is linked to a rigorously delineated model of interdependent decisions. We develop an incomplete information game that describes individual choices in the presence of social interactions. The equilibrium strategy profiles are linear. Standard models in the empirical social interactions literature are shown to be exact or approximate special cases of our general framework, which in turn provides a basis for understanding the microeconomic foundations of those models. We consider identification of both endogenous (peer) and contextual social effects under alternative assumptions on a priori information about network structure available to an analyst, and contrast the informational content of individual-level and aggregated data. Finally, we discuss potential ramifications for identification of endogenous group selection and differences between the information sets of analysts and agents.

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File URL: http://www.nber.org/papers/w19212.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 19212.

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Date of creation: Jul 2013
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Handle: RePEc:nbr:nberwo:19212
Note: CH DEV ED EFG HE LS PE TWP
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  1. Laurent Davezies & Xavier d'Haultfoeuille & Denis Fougère, 2007. "Identification of Peer Using Group Size Variation," Working Papers 2007-34, Centre de Recherche en Economie et Statistique.
  2. Ryo Nakajima, 2004. "Measuring Peer Effects on Youth Smoking Behavior," ISER Discussion Paper 0600, Institute of Social and Economic Research, Osaka University.
  3. Laurent Davezies & Xavier D'Haultfoeuille & Denis Fougère, 2009. "Identification of peer effects using group size variation," Econometrics Journal, Royal Economic Society, vol. 12(3), pages 397-413, November.
  4. Piero Cipollone & Alfonso Rosolia, 2007. "Social Interactions in High School: Lessons from an Earthquake," American Economic Review, American Economic Association, vol. 97(3), pages 948-965, June.
  5. Henderson, Vernon & Mieszkowski, Peter & Sauvageau, Yvon, 1978. "Peer group effects and educational production functions," Journal of Public Economics, Elsevier, vol. 10(1), pages 97-106, August.
  6. Epple, Dennis & Romano, Richard E, 1998. "Competition between Private and Public Schools, Vouchers, and Peer-Group Effects," American Economic Review, American Economic Association, vol. 88(1), pages 33-62, March.
  7. Edward L. Glaeser & Bruce Sacerdote & Jose A. Scheinkman, 1995. "Crime and Social Interactions," NBER Working Papers 5026, National Bureau of Economic Research, Inc.
  8. Bruce Sacerdote, 2000. "Peer Effects with Random Assignment: Results for Dartmouth Roommates," NBER Working Papers 7469, National Bureau of Economic Research, Inc.
  9. Manski, Charles F, 1993. "Identification of Endogenous Social Effects: The Reflection Problem," Review of Economic Studies, Wiley Blackwell, vol. 60(3), pages 531-42, July.
  10. Lee, Lung-fei, 2007. "Identification and estimation of econometric models with group interactions, contextual factors and fixed effects," Journal of Econometrics, Elsevier, vol. 140(2), pages 333-374, October.
  11. Timothy G. Conley & Christopher R. Udry, 2010. "Learning about a New Technology: Pineapple in Ghana," American Economic Review, American Economic Association, vol. 100(1), pages 35-69, March.
  12. Rege, Mari & Telle, Kjetil & Votruba, Mark, 2009. "Social Interaction Effects in Disability Pension Participation: Evidence from Plant Downsizing," UiS Working Papers in Economics and Finance 2009/30, University of Stavanger.
  13. Ivar Ekeland & James J. Heckman & Lars Nesheim, 2003. "Identification and Estimation of Hedonic Models," CESifo Working Paper Series 1031, CESifo Group Munich.
  14. Charles F. Manski & Joram Mayshar, 2003. "Private Incentives and Social Interactions: Fertility Puzzles in Israel," Journal of the European Economic Association, MIT Press, vol. 1(1), pages 181-211, 03.
  15. McManus, Douglas A., 1992. "How common is identification in parametric models?," Journal of Econometrics, Elsevier, vol. 53(1-3), pages 5-23.
  16. Robert Bifulco & Jason M. Fletcher & Stephen L. Ross, 2011. "The Effect of Classmate Characteristics on Post-secondary Outcomes: Evidence from the Add Health," American Economic Journal: Economic Policy, American Economic Association, vol. 3(1), pages 25-53, February.
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