BINARY CHOICE MODELS WITH SOCIAL NETWORK UNDER HETEROGENEOUS RATIONAL EXPECTATIONS

• 成果类型: Article
• 署名作者: Lee, Lung-fei; Li, Ji; Lin, Xu
• 署名单位: University System of Ohio; Ohio State University; Capital One Financial Corporation; Wayne State University
• 刊物名称: REVIEW OF ECONOMICS AND STATISTICS
• ISSN/ISSBN: 0034-6535
• DOI: 10.1162/REST_a_00401
• 发表日期: 2014-07
• 页码: 402-417
• 关键词: youth smoking; peer; identification; adolescents

摘要

This paper extends Brock and Durlauf's (2001a, 2001b) binary choice complete network (or group interaction) model with homogeneous rational expectations to a general network model with heterogeneous rational expectations. In our model, individuals will form expectations regarding peers' behaviors taking into account their characteristics. Endogenous, contextual, and correlated effects are all identifiable. Conditions for unique equilibrium are established. For a complete network with heterogeneous rational expectations, multiple equilibria can be characterized by an aggregate scalar index. The empirical results on adolescents' smoking behaviors show significant endogenous and contextual effects, even after controlling for school-grade random effects and school fixed effects.