Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/60741
Authors: 
Bisin, Alberto
Moro, Andrea
Topa, Giorgio
Year of Publication: 
2011
Series/Report no.: 
Staff Report, Federal Reserve Bank of New York 504
Abstract: 
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.
Subjects: 
social interactions
multiple equilibria
JEL: 
C31
D12
I14
Document Type: 
Working Paper

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