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An Econometric Model of Network Formation with an Application to Board Interlocks between Firms

Author

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  • Cristina Gualdani

    (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

Abstract

We study identification of the players' preferences in a network formation game featuring complete information, nonreciprocal links, and a spillover effect. We decompose the network formation game into local games such that the network formation game is in equilibrium if and only if each local game is in equilibrium. This decomposition helps us prove equilibrium existence, reduce the number of moment inequalities characterising the identified set, and simplify the calculation of the integrals entering those moment inequalities. The developed methodology is used to investigate Italian firms' incentives for having their executive directors sitting on competitors' boards.

Suggested Citation

  • Cristina Gualdani, 2021. "An Econometric Model of Network Formation with an Application to Board Interlocks between Firms," Post-Print hal-03548907, HAL.
    • Handle: RePEc:hal:journl:hal-03548907
    DOI: 10.1016/j.jeconom.2019.08.015
    Note: View the original document on HAL open archive server: https://hal.science/hal-03548907
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    References listed on IDEAS

    as
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    Citations

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    Cited by:

    1. Christian Bontemps & Cristina Gualdani & Kevin Remmy, 2023. "Price Competition and Endogenous Product Choice in Networks: Evidence From the US Airline Industry," CRC TR 224 Discussion Paper Series crctr224_2023_400, University of Bonn and University of Mannheim, Germany.
    2. St'ephane Bonhomme & Kevin Dano, 2023. "Functional Differencing in Networks," Papers 2307.11484, arXiv.org.
    3. Ming Li & Zhentao Shi & Yapeng Zheng, 2024. "Estimation and Inference in Dyadic Network Formation Models with Nontransferable Utilities," Papers 2410.23852, arXiv.org.
    4. Alonso Alfaro-Urena & Paolo Zacchia, 2024. "Matching to Suppliers in the Production Network: an Empirical Framework," CERGE-EI Working Papers wp775, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    5. Candelaria, Luis E. & Ura, Takuya, 2023. "Identification and inference of network formation games with misclassified links," Journal of Econometrics, Elsevier, vol. 235(2), pages 862-891.

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    Keywords

    Network formation; Multiple equilibria; Partial identification; Board interlocks;
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