Estimating Network Externalities in Undirected Link Formation Games

Margherita Comola () and Amit Dekel
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Margherita Comola: RITM - Réseaux Innovation Territoires et Mondialisation - Université Paris-Saclay, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - ENPC - École nationale des ponts et chaussées - IP Paris - Institut Polytechnique de Paris, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - ENPC - École nationale des ponts et chaussées - IP Paris - Institut Polytechnique de Paris
Amit Dekel: Aix-Marseille School of Economics

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Abstract: This paper explores the existence of network externalities in link formation games of incomplete information. It extends the structural estimation method in Leung (2015) to games where links are undirected and proposals are only partially observed. We provide an econometric characterization of the proposed two‐step estimator and document its performance through a simulation exercise. When the estimation method is applied to data on risk‐sharing arrangements in a Tanzanian village, results indicate that indirect connections matter.

Date: 2026
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Published in Journal of Applied Econometrics, In press, ⟨10.1002/jae.70079⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:pseptp:halshs-05838866

DOI: 10.1002/jae.70079

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