Working Paper: NBER ID: w19212
Authors: Lawrence E. Blume; William A. Brock; Steven N. Durlauf; Rajshri Jayaraman
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.
Keywords: social interactions; identification; peer effects; contextual effects
JEL Codes: C21; C23; C31; C35; C72; Z13
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| prior knowledge of social structure (Z13) | identification of utility parameters (L97) |
| type of data available (Y10) | identification of utility parameters (L97) |
| endogenous network formation (D85) | identification of utility parameters (L97) |
| full prior knowledge of social structure + individual-level data (D80) | identification of structural parameters (C51) |
| aggregated data (C80) | problematic identification of utility parameters (L97) |
| unknown peer effects sociomatrix + certain conditions (C92) | identification of utility parameters (L97) |