Logical Differencing in Dyadic Network Formation Models with Nontransferable Utilities

Wayne Gao, Ming Li and Sheng Xu

Papers from arXiv.org

Abstract: This paper considers a semiparametric model of dyadic network formation under nontransferable utilities (NTU). NTU arises frequently in real-world social interactions that require bilateral consent, but by its nature induces additive non-separability. We show how unobserved individual heterogeneity in our model can be canceled out without additive separability, using a novel method we call logical differencing. The key idea is to construct events involving the intersection of two mutually exclusive restrictions on the unobserved heterogeneity, based on multivariate monotonicity. We provide a consistent estimator and analyze its performance via simulation, and apply our method to the Nyakatoke risk-sharing networks.

Date: 2020-01, Revised 2021-07
New Economics Papers: this item is included in nep-ecm and nep-net
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Citations: View citations in EconPapers (3)

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Journal Article: Logical differencing in dyadic network formation models with nontransferable utilities (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:2001.00691

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