Dynamic Linear Economies with Social Interactions

Onur Ozgur and Alberto Bisin

Cahiers de recherche from Centre interuniversitaire de recherche en économie quantitative, CIREQ

Abstract: Social interactions arguably provide a rationale for several important phenomena, from smoking and other risky behavior in teens to e.g., peer effects in school performance. We study social interactions in dynamic economies. For these economies, we provide existence (Markov Perfect Equilibrium in pure strategies), ergodicity, and welfare results. Also, we characterize equilibria in terms of agents' policy function, spatial equilibrium correlations and social multiplier effects, depending on the nature of interactions. Most importantly, we study formally the issue of the identification of social interactions, with special emphasis on the restrictions imposed by dynamic equilibrium conditions.

Keywords: Conditional covariance stationarity; conformity; ergodicity; habits; identification; local and global interactions; Markov perfect equilibrium; social interactions; social norms; social processes; social status; spatial correlations (search for similar items in EconPapers)
JEL-codes: C31 C62 C72 C73 Z13 (search for similar items in EconPapers)
Pages: 87 pages
Date: 2011
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Citations: View citations in EconPapers (4)

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Related works:
Working Paper: Dynamic linear economies with social interactions (2011)
Working Paper: Dynamic linear economies with social interactions (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:mtl:montec:04-2011

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