The Estimation of Network Formation Games with Positive Spillovers

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08 Septembre 2017
Types de publication: 
Cahier de recherche
Auteur(s): 
Vincent Boucher
Axe de recherche: 
Enjeux économiques et financiers
Mots-clés: 
Network formation
Supermodular Games
Approximate Bayesian Computation
Classification JEL: 
D85
C11
C15
C72

I present a behavioural model of network formation with positive network externalities in which individuals have preferences for being part of a clique. The behavioural model leads to an associated supermodular (Topkis, 1979) normalform game. I show that the behavioural model converges to the greatest Nash equilibrium of the associated normal-form game. I propose an approximate Bayesian computation (ABC) framework, using original summary statistics, to make inferences about individuals' preferences, and provide an illustration using data on high school friendships.

Contact: 

Boucher: Department of Economics, Universitée Laval, CRREP and CREATE, vincent.boucher@ecn.ulaval.ca