Count Data Models with Heterogeneous Peer Effects under Rational Expectations
43 Pages Posted: 19 Nov 2020 Last revised: 29 May 2024
Date Written: May 27, 2024
Abstract
This paper develops a micro-founded peer effect model for count responses using a game of incomplete information. The model incorporates heterogeneity in peer effects through agents' groups based on observed characteristics. Parameter identification is established using the identification condition of linear models, which relies on the presence of friends' friends who are not direct friends in the network. I show that this condition extends to a large class of nonlinear models. The model parameters are estimated using the nested pseudo-likelihood approach, controlling for network endogeneity. I present an empirical application on students' participation in extracurricular activities. I find that females are more responsive to their peers than males, whereas male peers do not influence male students. An easy-to-use R package—named CDatanet—is available for implementing the model.
Keywords: Discrete model, Social networks, Bayesian game, Rational expectations.
JEL Classification: C25, C31, C73, D84
Suggested Citation: Suggested Citation