NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Homophily and Transitivity in Dynamic Network Formation

Bryan S. Graham

NBER Working Paper No. 22186
Issued in April 2016
NBER Program(s):IO, LS, TWP

In social and economic networks linked agents often share additional links in common. There are two competing explanations for this phenomenon. First, agents may have a structural taste for transitive links -- the returns to linking may be higher if two agents share links in common. Second, agents may assortatively match on unobserved attributes, a process called homophily. I study parameter identifiability in a simple model of dynamic network formation with both effects. Agents form, maintain, and sever links over time in order to maximize utility. The return to linking may be higher if agents share friends in common. A pair-specific utility component allows for arbitrary homophily on time-invariant agent attributes. I derive conditions under which it is possible to detect the presence of a taste for transitivity in the presence of assortative matching on unobservables. I leave the joint distribution of the initial network and the pair-specific utility component, a very high dimensional object, unrestricted. The analysis is of the `fixed effects' type. The identification result is constructive, suggesting an analog estimator, whose single large network properties I characterize.

You may purchase this paper on-line in .pdf format from SSRN.com ($5) for electronic delivery.

Access to NBER Papers

You are eligible for a free download if you are a subscriber, a corporate associate of the NBER, a journalist, an employee of the U.S. federal government with a ".GOV" domain name, or a resident of nearly any developing country or transition economy.

If you usually get free papers at work/university but do not at home, you can either connect to your work VPN or proxy (if any) or elect to have a link to the paper emailed to your work email address below. The email address must be connected to a subscribing college, university, or other subscribing institution. Gmail and other free email addresses will not have access.

E-mail:

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w22186

Users who downloaded this paper also downloaded* these:
Graham w20341 An econometric model of link formation with degree heterogeneity
Hansen and Sargent w22000 Sets of Models and Prices of Uncertainty
Casella, Laslier, and Macé w22231 Democracy for Polarized Committees: The Tale of Blotto's Lieutenants
Acemoglu, Egorov, and Sonin w22174 Social Mobility and Stability of Democracy: Re-evaluating De Tocqueville
Kocherlakota w22009 Sluggish Inflation Expectations: A Markov Chain Analysis
 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

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

Contact Us