The Empirical Content Of Models With Multiple Equilibria In Economies With Social Interactions
The authors study a general class of models with social interactions that might display multiple equilibria. They propose an estimation procedure for these models and evaluate its efficiency and computational feasibility relative to different approaches taken to the curse of dimensionality implied by the multiplicity. Using data on smoking among teenagers, they implement the proposed estimation procedure to understand how group interactions affect health-related choices. They find that interaction effects are strong both at the school level and at the smaller friends-network level.