Back to Search
Start Over
Binary Outcomes and Linear Interactions
- Publication Year :
- 2020
- Publisher :
- HAL CCSD, 2020.
-
Abstract
- Heckman and MaCurdy (1985) first showed that binary outcomes are compatible with linear econometric models of interactions. This key insight was unduly discarded by the literature on the econometrics of games. We consider general models of linear interactions in binary outcomes that nest linear models of peer effects in networks and linear models of entry games. We characterize when these models are well defined. Errors must have a specific discrete structure. We then analyze the models' game-theoretic microfoundations. Under complete information and linear utilities, we characterize the preference shocks under which the linear model of interactions forms a Nash equilibrium of the game. Under incomplete information and independence, we show that the linear model of interactions forms a Bayes-Nash equilibrium if and only if preference shocks are iid and uniformly distributed. We also obtain conditions for uniqueness. Finally, we propose two simple consistent estimators. We revisit the empirical analyses of teenage smoking and peer effects of Lee, Li, and Lin (2014) and of entry into airline markets of Ciliberto and Tamer (2009). Our reanalyses showcase the main interests of the linear framework and suggest that the estimations in these two studies suffer from endogeneity problems.
- Subjects :
- JEL: C - Mathematical and Quantitative Methods/C.C3 - Multiple or Simultaneous Equation Models • Multiple Variables/C.C3.C31 - Cross-Sectional Models • Spatial Models • Treatment Effect Models • Quantile Regressions • Social Interaction Models
Econometrics of Games
JEL: C - Mathematical and Quantitative Methods/C.C3 - Multiple or Simultaneous Equation Models • Multiple Variables/C.C3.C35 - Discrete Regression and Qualitative Choice Models • Discrete Regressors • Proportions
JEL: C - Mathematical and Quantitative Methods/C.C5 - Econometric Modeling/C.C5.C57 - Econometrics of Games and Auctions
Binary Outcomes
Linear Probability Model
[SHS.ECO] Humanities and Social Sciences/Economics and Finance
[SHS.ECO]Humanities and Social Sciences/Economics and Finance
Peer Effects
Subjects
Details
- Language :
- English
- Database :
- OpenAIRE
- Accession number :
- edsair.dedup.wf.001..d98edf70e4ec999031c19d71a1188450