A Structural Model for the Coevolution of Networks and Behavior

Chih-Sheng Hsieh, Michael D. Konig and Xiaodong Liu
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Michael D. Konig: CEPR, ETH Zurich, KOF Swiss Economic Institute, Tinbergen Institute, and VU Amsterdam

The Review of Economics and Statistics, 2022, vol. 104, issue 2, 355-367

Abstract: This paper introduces a structural model for the coevolution of networks and behavior. We characterize the equilibrium of the underlying game and adopt the Bayesian Double Metropolis-Hastings algorithm to estimate the model. We further extend the model to incorporate unobserved heterogeneity and show that ignoring this heterogeneity can lead to biased estimates in simulation experiments. We apply the model to study RD investment and collaboration decisions in the chemical and pharmaceutical industry and find a positive knowledge spillover effect. Our model also provides a tractable framework for a long-run key player analysis.

Date: 2022
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Working Paper: A Structural Model for the Coevolution of Networks and Behavior (2019)
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