Two-step estimation of network-formation models with incomplete information

Michael Leung

Journal of Econometrics, 2015, vol. 188, issue 1, 182-195

Abstract: We model network formation as a simultaneous game of incomplete information, allowing linking decisions to depend on the structure of the network as well as the attributes of agents. When the data is rationalized by a symmetric equilibrium, meaning observationally equivalent agents choose the same ex-ante strategies, the model can be estimated using a computationally simple two-step estimator. We derive its asymptotic properties under a sequence of models sending the number of agents to infinity, which enables inference with only a single network observation. Our procedure generalizes dyadic regression, allowing the latent index to be a function of endogenous regressors that depend on the network. We apply the estimator to study trust networks in rural Indian villages.

Keywords: Social networks; Network formation; Multiple equilibria; Discrete games of incomplete information (search for similar items in EconPapers)
JEL-codes: C13 C31 D85 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (41)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:econom:v:188:y:2015:i:1:p:182-195

DOI: 10.1016/j.jeconom.2015.04.001

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