arXiv 12 Jan 2020 · Econometrics
arXiv:2001.03838 · PDF · DOI · OpenAlex · Extracted main text
This paper explores strategic network formation under incomplete information using data from a single large network. We allow the utility function to be nonseparable in an individual's link choices to capture the spillover effects from friends in common. In a network with n individuals, an individual with a nonseparable utility function chooses between 2^{n-1} overlapping portfolios of links. We develop a novel approach that applies the Legendre transform to the utility function so that the optimal link choices can be represented as a sequence of correlated binary choices. The link dependence that results from the preference for friends in common is captured by an auxiliary variable introduced by the Legendre transform. We propose a two-step estimator that is consistent and asymptotically normal. We also derive a limiting approximation of the game as n grows large that simplifies the computation in large networks. We apply these methods to favor exchange networks in rural India and find that the direction of support from a mutual link matters in facilitating favor provision.
appendix boundary found by appendix_command · 52% of the source is main text. Read the extracted text to check this.
The works this paper leans on most, across its whole bibliography — not restricted to papers in our corpus. Ranked by composite intensity, which combines how often a work is mentioned, how many sections mention it, and how much of that falls in the main text rather than the appendix.
| Reference | Intensity | Mentions | Sections | Main text | |
|---|---|---|---|---|---|
| 1 | Leung, M. P (2015) Two-Step Estimation of Network-Formation Models with Incomplete Information | 1.000 | 21 | 7 | 100% |
| 2 | Jackson, M. O., T. Rodriguez-Barraquer, and X. Tan (2012) Social Capital and Social Quilts: Network Patterns of Favor Exchange | 1.000 | 13 | 3 | 100% |
| 3 | Jackson, M. O (2008) Social and Economic Networks | 1.000 | 5 | 3 | 100% |
| 4 | Mele, A (2017) A Structural Model of Dense Network Formation | 0.874 | 6 | 2 | 100% |
| 5 | Jackson, M. O. and L. Yariv (2007) Diffusion of Behavior and Equilibrium Properties in Network Games | 0.874 | 5 | 2 | 100% |
| 6 | Myatt, D. P. and C. C. Wallace (2003) Sophisticated play by idiosyncratic agents | 0.843 | 4 | 3 | 75% |
| 7 | Bajari, P., H. Hong, J. Krainer, and D. Nekipelov (2010) Estimating Static Models of Strategic Interactions | 0.811 | 4 | 2 | 100% |
| 8 | Jackson, M. O., B. W. Rogers, and Y. Zenou (2017) The Economic Consequences of Social-Network Structure | 0.811 | 4 | 2 | 100% |
| 9 | Jackson, M. O. and A. Watts (2002) The Evolution of Social and Economic Networks | 0.811 | 4 | 2 | 100% |
| 10 | Myatt, D. P. and C. C. Wallace (2004) Adaptive play by idiosyncratic agents | 0.794 | 6 | 3 | 50% |
Showing the top 10 of 69 scored citations.
arXiv econ.EM papers that cite this one, ranked by how heavily they lean on it.