The empirical content of models with multiple equilibria in economies with social interactions

Research, Preprint English OPEN
Bisin, Alberto ; Moro, Andrea ; Topa, Giorgio (2011)
  • Publisher: New York, NY: Federal Reserve Bank of New York
  • Subject: C31 | Gesundheitsvorsorge | D12 | social interactions | Verhalten | multiple equilibria | Human behavior ; Social choice ; Health | Soziale Beziehungen | I14 | Sch├Ątztheorie
    • jel: jel:C52 | jel:C51 | jel:I1
      ddc: ddc:330

We study a general class of models with social interactions that might display multiple equilibria. We propose an estimation procedure for these models and evaluate its efficiency and computational feasibility relative to different approaches taken to the curse of dimensionality implied by the multiplicity. Using data on smoking among teenagers, we implement the proposed estimation procedure to understand how group interactions affect health-related choices. We find that interaction effects are strong both at the school level and at the smaller friends-network level. Multiplicity of equilibria is pervasive at the estimated parameter values, and equilibrium selection accounts for about 15 percent of the observed smoking behavior. Counterfactuals show that student interactions, surprisingly, reduce smoking by approximately 70 percent with respect to the equilibrium smoking that would occur without interactions.
  • References (17)
    17 references, page 1 of 2

    5See Berry and Tamer (2007) for a survey of this literature.

    6See also Manski and Tamer (2002), Andrews, Berry, and Jia (2004), Ciliberto and Tamer (2009), Beresteanu, Molchanov, and Molinari (2008), and Galichon and Henry (2008). Echenique and Komunjer (2005) have results regarding the identi cation of monotone comparative statics in incomplete econometric structures.

    7See also Pakes, Ostrovsky, and Berry (2004), Pesendorfer and Schmidt-Dengler (2004), and Bajari, Benkard, and Levin (2007); see Aguirregabiria (2004) for some foundational theoretical econometric work. 8See also Fang 2006.

    Aguirregabiria, V. (2004): "Pseudo Maximum Likelihood Estimation of Structural Models Involving Fixed-Point Problems," Economics Letters, 84(3), 335-40.

    Aguirregabiria, V. and P. Mira (2007): \Sequential Estimation of Dynamic Discrete Games," Econometrica, 75(1), 1-53.

    Calvo-Armengol, A., E. Patacchini, and Y. Zenou (2009): \Peer E ects and Social Networks in Education," The Review of Economic Studies, forthcoming.

    Ciliberto, F. and E. Tamer (2009): \Market Structure and Multiple Equilibria in Airline Markets," Econometrica, 77 (6), 1791-1828.

    Conley, T.G. and G. Topa (2002): \Socio-Economic Distance and Spatial Patterns in Unemployment ", Journal of Applied Econometrics, Vol. 17 (4), 303-327.

    Conley, T.G. and G. Topa (2007): \Estimating Dynamic Local Interactions Models", Journal of Econometrics, Vol. 140 (1), 282-303.

    Crane, J. (1991): \The Epidemic Theory of Ghettoes and Neighborhood E ects of Dropping Out and Teenage Childbearing," American Journal of Sociology, 96, 1229-59.

  • Metrics
    No metrics available
Share - Bookmark