NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

The Empirical Content of Models with Multiple Equilibria in Economies with Social Interactions

Alberto Bisin, Andrea Moro, Giorgio Topa

NBER Working Paper No. 17196
Issued in July 2011
NBER Program(s):   CH   HE

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.

download in pdf format
   (693 K)

email paper

The NBER Bulletin on Aging and Health provides summaries of publications like this.  You can sign up to receive the NBER Bulletin on Aging and Health by email.

This paper is available as PDF (693 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w17196

Users who downloaded this paper also downloaded these:
Card and Giuliano w17088 Peer Effects and Multiple Equilibria in the Risky Behavior of Friends
Barwick and Pathak w17227 The Costs of Free Entry: An Empirical Study of Real Estate Agents in Greater Boston
Bayer and w12211 Identifying Individual and Group Effects in the Presence of Sorting: A Neighborhood Effects Application
Bisin and Verdier w16512 The Economics of Cultural Transmission and Socialization
Cicala, Fryer, and Spenkuch w16880 A Roy Model of Social Interactions
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us