Conformism and Self-Selection in Social Networks

Abstract

I present a model of conformism in social networks that incorporates both peer effects and self-selection. I find that equilibrium behaviors are linked through the Laplacian matrix of the equilibrium network. I show that conformism has positive social value and that social welfare can be bounded by network centrality and connectivity measures. I apply the model using empirical data on high school student participation in extracurricular activities. I find that the local effects of conformism (i.e. endogenous peer effect for a fixed network structure) range from 7.5% to 45%, depending on the number of peers that an individual has. Simulations show that the optimal policies of an inequality-averse policy-maker change in relation to the size of a school. Small schools should encourage shy students to integrate more with other students, while large schools should focus on promoting role models within the school.

Keywords: Conformism, Peer effects, Network formation

JEL Classification: D85, C31, C57