Discrete Choice with Social Interactions I: Theory

William Brock and Steven Durlauf

No 5291, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper provides an analysis of aggregate behavioral outcomes when individual utility exhibits social interaction effects. We study generalized logistic models of individual choice which incorporate terms reflecting the desire of individuals to conform to the behavior of others in an environment of noncooperative decisionmaking. Laws of large numbers are generated in such environments. Multiplicity of equilibria in these models, which are equivalent to the existence of multiple self-consistent means for average choice behavior, will exist when the social interactions exceed a particular threshold. Local stability of these multiple equilibria is also studied. The properties of the noncooperative economy are contrasted with the properties of an economy in which a social planner determines the set of individual choices. The model is additionally shown to be well suited to explaining a number of empirical phenomena, such as threshold effects in individual behavior, ethnic group fixed effects of income equations, and large cross-group differences in binary choice behavior.

JEL-codes: D6 J2 (search for similar items in EconPapers)
Date: 1995-10
Note: EFG
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (44)

Published as Brock, William A. and Steven N. Durlauf. "Discrete Choice With Social Interactions," Review of Economic Studies, 2001, v68(235,Apr), 235-260.

Downloads: (external link)
http://www.nber.org/papers/w5291.pdf (application/pdf)

Related works:
Working Paper: Discrete Choice with Social Interactions I: Theory (1995)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:5291

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w5291

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().