Theory and Empirics
This chapter discusses the theory and empirics of social interactions, with particular emphasis on the role of social context in individual decisions. It begins by introducing a sequence of models that highlight applications in different empirical social interaction settings, including a simple static model that is used to link social interactions theory with social networks theory, notably random graph theory. A dynamic model, where the social structure accommodates a variety of social interaction motives, is then described and solved as a dynamic system of evolving individual actions. The solution links social interactions theory with spatial econometrics. The chapter examines the econometrics of social interactions in social networks and social learning in urban settings before concluding with a review of the literature on social interactions in economics.
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