Testing Unilateral and Bilateral Link Formation

38 Pages Posted: 8 Sep 2009

See all articles by Margherita Comola

Margherita Comola

Paris School of Economics (PSE); Université Paris I Panthéon-Sorbonne

Marcel Fafchamps

Stanford University - Freeman Spogli Institute for International Studies

Multiple version iconThere are 2 versions of this paper

Date Written: August 2009

Abstract

The literature has shown that network architecture depends crucially on whether links are formed unilaterally or bilaterally, that is, on whether the consent of both nodes is required for a link to be formed. We propose a test of whether network data is best seen as an actual link or willingness to link and, in the latter case, whether this link is generated by an unilateral or bilateral link formation process. We illustrate this test using survey answers to a risk-sharing question in Tanzania. We find that the bilateral link formation model fits the data better than the unilateral model, but the data are best interpreted as willingness to link rather than an actual link. We then expand the model to include self-censoring and find that models with self-censoring fit the data best.

Keywords: network architecture, pairwise stability, risk sharing

JEL Classification: C12, C52, D85

Suggested Citation

Comola, Margherita and Fafchamps, Marcel, Testing Unilateral and Bilateral Link Formation (August 2009). CEPR Discussion Paper No. DP7406, Available at SSRN: https://ssrn.com/abstract=1469905

Margherita Comola (Contact Author)

Paris School of Economics (PSE) ( email )

48 Boulevard Jourdan
Paris, 75014 75014
France

Université Paris I Panthéon-Sorbonne ( email )

17, rue de la Sorbonne
Paris, IL 75005
France

Marcel Fafchamps

Stanford University - Freeman Spogli Institute for International Studies ( email )

Stanford, CA 94305
United States

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