Peer vs. Network Effects: Microfoundations, Identification, and Beyond

Yves Zenou ()
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Yves Zenou: Monash University

No 18501, IZA Discussion Papers from IZA Network @ LISER

Abstract: This paper reviews the theoretical and empirical foundations of peer and network effects, aiming to bridge insights from both literatures. We first analyze the microfoundations of peer effects through linear–quadratic network games, linking equilibrium behavior to network centrality and highlighting the role of key players. Then, we examine the main identification challenges in linear-in-means models—reflection, correlated effects, and sorting—and show how introducing explicit network structures can help address them. We also review reduced-form strategies based on within-school cohort composition, exposure to peers’ shocks, random assignment, and exogenous variation in network links. Finally, we discuss how structural models of network formation and individual effort choices can resolve endogeneity concerns. The paper concludes with recent advances on non-linear and multiplex interactions, where individuals respond to specific peers and operate across multiple, interdependent layers.

Keywords: social interactions; identification; network games; centrality; multiplex networks; non-linearities (search for similar items in EconPapers)
JEL-codes: A14 C57 D85 Z13 (search for similar items in EconPapers)
Date: 2026-03
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