Discrete Games in Endogenous Networks: Equilibria and Policy

Anton Badev

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arXiv · 1705.03137

Discrete Games in Endogenous Networks: Equilibria and Policy

Anton Badev

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Abstract

In games of friendship links and behaviors, I propose $k$-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.

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Anton Badev. 2017-05-09. Discrete Games in Endogenous Networks: Equilibria and Policy. https://arxiv.org/abs/1705.03137

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