This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Discrete Choice with Social Interactions and Endogenous Memberships

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Giulio Zanella ()

Additional information is available for the following registered author(s):

Abstract

This paper tackles the issue of self-selection in social interactions models. I develop a theory of sorting and behavior, when the latter is subject to social influences, extending the model developed by Brock and Durlauf (2001a, 2003) to allow for equilibrium group formation. Individuals choose a group, and a behavior subject to an endogenous social effect. The latter turns out to be a segregating force, and stable equilibria are stratified. The sorting process may induce, inefficiently, multiple behavioral equilibria. Such a theory serves as a means to solve identification and selection problems that may undermine the empirical detection of social effects on individual behavior. I exploit the theoretical model to build a nonlinear (in the social effect) selection correction term. Such a term allows identification, and solves the selection problem that arises when individuals can choose the group whose effect the researcher is trying to disentangle. The resulting econometric model, although relying on strict parametric assumptions, indicates a viable alternative when reliable instrumental variables are not available, or randomized experiments not possible.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.econ-pol.unisi.it/quaderni/442.pdf
File Format: application/pdf
File Function:
Download Restriction: no

Publisher Info
Paper provided by Department of Economics, University of Siena in its series Department of Economics University of Siena with number 442.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length:
Date of creation: Nov 2004
Date of revision:
Handle: RePEc:usi:wpaper:442

Contact details of provider:
Postal: Piazza S.Francesco,7 - 53100 Siena
Phone: (39)(0577)298645
Fax: (39)(0577)298661
Email:
Web page: http://www.econ-pol.unisi.it/
More information through EDIRC

For technical questions regarding this item, or to correct its listing, contact: (Fabrizio Becatti).

Related research
Keywords: social interactions; neighborhood effects; sorting; self-selection; nested logit; identification of social effects;

Other versions of this item:

Find related papers by JEL classification:
C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models
D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
E19 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Other
Z13 - Other Special Topics - - Cultural Economics - - - Social Norms and Social Capital; Social Networks Economic Anthropology
Z19 - Other Special Topics - - Cultural Economics - - - Other

This paper has been announced in the following NEP Reports:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Milgrom, Paul & Roberts, John, 1990. "Rationalizability, Learning, and Equilibrium in Games with Strategic Complementarities," Econometrica, Econometric Society, vol. 58(6), pages 1255-77, November. [Downloadable!] (restricted)
  2. William A. Brock & Steven N. Durlauf, 2000. "Interactions-Based Models," Working Papers 00-05-028, Santa Fe Institute.
    Other versions:
  3. Glaeser, Edward L & Sacerdote, Bruce & Scheinkman, Jose A, 1996. "Crime and Social Interactions," The Quarterly Journal of Economics, MIT Press, vol. 111(2), pages 507-48, May. [Downloadable!] (restricted)
    Other versions:
  4. repec:att:wimass:192042 is not listed on IDEAS
  5. repec:att:wimass:192031 is not listed on IDEAS
  6. Edward L. Glaeser & Jose A. Scheinkman, 1999. "Measuring Social Interactions," Harvard Institute of Economic Research Working Papers 1878, Harvard - Institute of Economic Research.
  7. Patrick Bayer & Robert McMillan & Kim Rueben, 2004. "An Equilibrium Model of Sorting in an Urban Housing Market," NBER Working Papers 10865, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  8. Evans, William N & Oates, Wallace E & Schwab, Robert M, 1992. "Measuring Peer Group Effects: A Study of Teenage Behavior," Journal of Political Economy, University of Chicago Press, vol. 100(5), pages 966-91, October. [Downloadable!] (restricted)
  9. Benabou, Roland, 1993. "Workings of a City: Location, Education, and Production," The Quarterly Journal of Economics, MIT Press, vol. 108(3), pages 619-52, August. [Downloadable!] (restricted)
    Other versions:
  10. William A. Brock & Steven N. Durlauf & Kenneth D. West, 2003. "Policy Evaluation in Uncertain Economic Environments," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 34(2003-1), pages 235-322. [Downloadable!]
    Other versions:
  11. Epple, Dennis & Platt, Glenn J., 1998. "Equilibrium and Local Redistribution in an Urban Economy when Households Differ in both Preferences and Incomes," Journal of Urban Economics, Elsevier, vol. 43(1), pages 23-51, January. [Downloadable!] (restricted)
  12. Yannis M. Ioannides & Jeffrey E. Zabel, 2002. "Interaction, Neighborhood Selection and Housing Demand," Discussion Papers Series, Department of Economics, Tufts University 0208, Department of Economics, Tufts University. [Downloadable!]
    Other versions:
  13. William A. Brock & Steven N. Durlauf, 2003. "Multinomial Choice with Social Interactions," NBER Technical Working Papers 0288, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  14. Falk, Armin & Ichino, Andrea, 2003. "Clean Evidence on Peer Pressure," CEPR Discussion Papers 3834, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  15. Durlauf, Steven N, 1996. " A Theory of Persistent Income Inequality," Journal of Economic Growth, Springer, vol. 1(1), pages 75-93, March.
    Other versions:
  16. George A. Akerlof, 1997. "Social Distance and Social Decisions," Econometrica, Econometric Society, vol. 65(5), pages 1005-1028, September.
  17. Herriges, Joseph A. & Kling, Catherine L., 1996. "Testing the consistency of nested logit models with utility maximization," Economics Letters, Elsevier, vol. 50(1), pages 33-39, January. [Downloadable!] (restricted)
    Other versions:
  18. Larry Samuelson, 2004. "Information-Based Relative Consumption Effects," Econometrica, Econometric Society, vol. 72(1), pages 93-118, 01. [Downloadable!] (restricted)
  19. Manski, C.F., 1990. "The Selection Problem," Working papers 90-12, Wisconsin Madison - Social Systems.
  20. Heckman, James J, 1979. "Sample Selection Bias as a Specification Error," Econometrica, Econometric Society, vol. 47(1), pages 153-61, January. [Downloadable!] (restricted)
  21. Benabou, Roland, 1996. "Equity and Efficiency in Human Capital Investment: The Local Connection," Review of Economic Studies, Blackwell Publishing, vol. 63(2), pages 237-64, April. [Downloadable!] (restricted)
  22. repec:att:wimass:199217 is not listed on IDEAS
  23. Brock, William A & Durlauf, Steven N, 2001. "Discrete Choice with Social Interactions," Review of Economic Studies, Blackwell Publishing, vol. 68(2), pages 235-60, April.
  24. Kenneth Train, 2003. "Discrete Choice Methods with Simulation," Online economics textbooks, SUNY-Oswego, Department of Economics, number emetr2, March. [Downloadable!]
  25. de Bartolome, Charles A M, 1990. "Equilibrium and Inefficiency in a Community Model with Peer Group Effects," Journal of Political Economy, University of Chicago Press, vol. 98(1), pages 110-33, February. [Downloadable!] (restricted)
  26. Borsch-Supan, Axel, 1990. "On the compatibility of nested logit models with utility maximization," Journal of Econometrics, Elsevier, vol. 43(3), pages 373-388, March. [Downloadable!] (restricted)
  27. repec:att:wimass:1920315 is not listed on IDEAS
  28. Manski, Charles F, 1993. "Identification of Endogenous Social Effects: The Reflection Problem," Review of Economic Studies, Blackwell Publishing, vol. 60(3), pages 531-42, July. [Downloadable!] (restricted)
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Yannis M. Ioannides & Giulio Zanella, 2008. "Searching for the Best Neighborhood: Mobility and Social Interactions," Department of Economics University of Siena 533, Department of Economics, University of Siena. [Downloadable!]
    Other versions:
  2. Ethan Cohen-Cole & Giulio Zanella, 2008. "Welfare Stigma or Information Sharing? Decomposing Social Interactions Effects in Social Benefit Use," Department of Economics University of Siena 531, Department of Economics, University of Siena. [Downloadable!]
  3. Ethan Cohen-Cole & Burcu Duygan-Bump, 2008. "Household bankruptcy decision: the role of social stigma vs. information sharing," Quantitative Analysis Unit Working Paper QAU08-6, Federal Reserve Bank of Boston. [Downloadable!]
  4. Christian Ghiglino & Sanjeev Goyal, 2008. "Keeping up with the neighbours: social interaction in a market economy," Economics Discussion Papers 655, University of Essex, Department of Economics. [Downloadable!]
Statistics
Access and download statistics

Did you know? You too can volunteer for RePEc, for example by encouraging others to register as authors.

This page was last updated on 2009-11-3.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.