Approximate variational inference for a model of social interactions

Angelo Mele

No 13-16, Working Papers from NET Institute

Abstract: This paper proposes approximate variational inference methods for estimation of a strategic model of social interactions. Players interact in an exogenous network and sequentially choose a binary action. The utility of an action is a function of the choices of neighbors in the network. I prove that the interaction process can be represented as a potential game and it converges to a unique stationary equilibrium distribution. However, exact inference for this model is infeasible because of a computationally intractable likelihood, which cannot be evaluated even when there are few players. To overcome this problem, I propose variational approximations for the likelihood that allow approximate inference. This technique can be applied to any discrete exponential family, and therefore it is a general tool for inference in models with a large number of players. The methodology is illustrated with several simulated datasets and compared with MCMC methods.

Keywords: Variational approximations; Bayesian Estimation; Social Interactions (search for similar items in EconPapers)
JEL-codes: C13 C73 D85 (search for similar items in EconPapers)
Pages: 17 pages
Date: 2013-09
New Economics Papers: this item is included in nep-ecm, nep-gth, nep-upt and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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