Discrete Games in Endogenous Networks: Equilibria and Policy
Abstract
In games of friendship links and behaviors, I propose -player Nash stability---a family of equilibria, indexed by a measure of robustness given by the number of permitted link changes, which is (ordinally and cardinally) ranked in a probabilistic sense. Application of the proposed framework to adolescents' tobacco smoking and friendship decisions suggests that: (a.) friendship networks respond to increases of tobacco prices and this response amplifies the intended policy effect on smoking, (b.) racially desegregating high-schools, via stimulating the social interactions of students with different intrinsic propensity to smoke, decreases the overall smoking prevalence, (c.) adolescents are averse to sharing friends so that there is a rivalry for friendships, (d.) when data on individuals' friendship network is not available, the importance of price centered policy tools is underestimated.
Keywords
Cite
@article{arxiv.1705.03137,
title = {Discrete Games in Endogenous Networks: Equilibria and Policy},
author = {Anton Badev},
journal= {arXiv preprint arXiv:1705.03137},
year = {2017}
}