Multinomial Choice with Social Interactions

46 Pages Posted: 6 Mar 2003 Last revised: 17 Apr 2022

See all articles by William A. Brock

William A. Brock

University of Wisconsin, Madison - Department of Economics; University of Missouri at Columbia - Department of Economics

Steven N. Durlauf

University of Chicago; National Bureau of Economic Research (NBER); Korea Development Institute (KDI)

Date Written: March 2003

Abstract

This paper develops a model of individual decisionmaking in the presence of social interactions when the number of available choices is finite. We show how a multinomial logit model framework may be used to model such decisions in a way that permits a tight integration of theory and econometrics. Conditions are given under which aggregate choice behavior in a population exhibits multiple self-consistent equilibria. An econometric version of the model is shown to be identified under relatively weka conditions. That analysis is extended to allow for general error distributions and some preliminary ways to account for the endogeneity of group memberships are developed.

Suggested Citation

Brock, William A. and Durlauf, Steven N., Multinomial Choice with Social Interactions (March 2003). NBER Working Paper No. t0288, Available at SSRN: https://ssrn.com/abstract=385026

William A. Brock

University of Wisconsin, Madison - Department of Economics ( email )

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University of Missouri at Columbia - Department of Economics ( email )

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Steven N. Durlauf (Contact Author)

University of Chicago ( email )

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Korea Development Institute (KDI) ( email )