Linear Social Interactions Models

Lawrence Blume, William Brock, Steven Durlauf and Rajshri Jayaraman

No 19212, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper provides a systematic analysis of identification in linear social interactions models. This is both a theoretical and an econometric exercise as the analysis is linked to a rigorously delineated model of interdependent decisions. We develop an incomplete information game that describes individual choices in the presence of social interactions. The equilibrium strategy profiles are linear. Standard models in the empirical social interactions literature are shown to be exact or approximate special cases of our general framework, which in turn provides a basis for understanding the microeconomic foundations of those models. We consider identification of both endogenous (peer) and contextual social effects under alternative assumptions on a priori information about network structure available to an analyst, and contrast the informational content of individual-level and aggregated data. Finally, we discuss potential ramifications for identification of endogenous group selection and differences between the information sets of analysts and agents.

JEL-codes: C21 C23 C31 C35 C72 Z13 (search for similar items in EconPapers)
Date: 2013-07
Note: CH DEV ED EFG EH LS PE TWP
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Citations: View citations in EconPapers (10)

Published as Lawrence E. Blume & William A. Brock & Steven N. Durlauf & Rajshri Jayaraman, 2015. "Linear Social Interactions Models," Journal of Political Economy, University of Chicago Press, vol. 123(2), pages 444 - 496.

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