Social Interactions

Prepared for Annual Reviews of Economics.

Fashion, Cooperation, and Social Interactions

Fashion plays such a crucial rule in the evolution of culture and society that it is regarded as a second nature to the human being. Also, its impact on economy is quite nontrivial. On what is fashionable, interestingly, there are two viewpoints that are both extremely widespread but almost opposite: conformists think that what is popular is fashionable, while rebels believe that being different is the essence. Fashion color is fashionable in the first sense, and Lady Gaga in the second. We investigate a model where the population consists of the afore-mentioned two groups of people that are located on social networks (a spatial cellular automata network and small-world networks). This model captures two fundamental kinds of social interactions (coordination and anti-coordination) simultaneously, and also has its own interest to game theory: it is a hybrid model of pure competition and pure cooperation. This is true because when a conformist meets a rebel, they play the zero sum matching pennies game, which is pure competition. When two conformists (rebels) meet, they play the (anti-) coordination game, which is pure cooperation. Simulation shows that simple social interactions greatly promote cooperation: in most cases people can reach an extraordinarily high level of cooperation, through a selfish, myopic, naive, and local interacting dynamic (the best response dynamic). We find that degree of synchronization also plays a critical role, but mostly on the negative side. Four indices, namely cooperation degree, average satisfaction degree, equilibrium ratio and complete ratio, are defined and applied to measure people's cooperation levels from various angles. Phase transition, as well as emergence of many interesting geographic patterns in the cellular automata network, is also observed.Comment: 21 pages, 12 figure

Topologies of Social Interactions

The paper adapts to richer social structures the Brock-Durlauf model of interactive discrete choice, where individuals’ decisions are influenced by the decisions of others. Social structure is modelled by a description of who interacts with whom, by means of a graph, with individuals as vertices and interaction between individuals as edges. The paper extends the mean field case to such alternative stylized interaction topologies as when individuals are connected through a common intermediary, the graph topology of interactions is a cycle or an one-dimensional lattice. Some results are qualitatively similar to the mean field case, but a richer class of anisotropic equilibria is also explored, for the case of the cycle and one-dimensional lattice. Social equilibria are also explored under the condition that individuals’ behavior is affected by the actual behavior of their neighbors and links are made with the econometric theory of systems of simultaneous equations modelling discrete decisions. The paper studies the role of interaction topology for the dynamics of adjustment towards isotropic equilibria. It compares circular interaction along a one-dimensional lattice with and without closure and shows that both lead to endogenous and generally transient spatial oscillations. However, closure of the social structure is responsible for relative persistence.interactions, dynamics, spatial oscillations, interactive discrete choice, neighborhood effects, Ising model, random fields

Social interactions and spillovers.

The aim of this paper is to provide a tractable model where both socialization (or network formation) and productive efforts can be analyzed simultaneously. This permits a fullfledged equilibrium/welfare analysis of network formation with endogenous productive efforts and heterogeneous agents. We show that there exist two stable interior equilibria, which we can Pareto rank. The socially efficient outcome lies between these two equilibria. When the intrinsic returns to production and socialization increase, all equilibrium actions decrease at the Pareto-superior equilibrium, while they increase at the Pareto-inferior equilibrium. In both cases, the percentage change in socialization effort is higher (in absolute value) than that of the productive effortPeer effects; Network formation; Welfare;

Determining whether ICT improves social interactions

[Abstract]: Governments are increasingly aware of the power of the Internet as medium for communication and social interaction. Using the Internet Technology on broadband provides fact access to information and communication. In Western Australia, a network neighborhood is built on the combination of these technologies as a pilot project. This technology is expected to be used by the Western Australian government in order to provide services that would realize in a better quality of life to the residents of this neighborhood. This paper presents the results of a study conducted to test whether ICT actually improves the quality of life by facilitating social interactions as this appears to be a major cause for concern. The aim of the study is to present evidence that ICT is capable of enhancing social interactions and then to justify the use of this technology for improving the quality of life. For this purpose, after studying the Network Neighborhood by a team of students, a survey was conducted among residents of a small township in Western Australia to determine the positive effect of technology or otherwise. The initial survey administered prior to the implementation of the technology indicated that people in the Picton Waters neighbourhood were socially isolated and needed social interactions to improve the quality of their lives

Intentions and Social Interactions

In psychological games, higher-order beliefs, emotions, and motives - in addition to actions - affect players’ payoffs. Suppose you are tolerated as opposed to being genuinely accepted by your peers and “friends”. In particular, suppose you are invited to a party, movie, dinner, etc not because your company is desired but because the inviter would feel guilty if she did not invite you. In all of these cases, it is conceivable that the intention behind the action will matter and hence will affect your payoffs. I model intentions in a dynamic psychological game under incomplete information. I find a complex social interaction in this game. In particular, a player may stick to a strategy of accepting every invitation with the goal of discouraging insincere invitations. This may lead one to erroneously infer that this player is eagerly waiting for an invitation, when indeed his behavior is driven more by strategic considerations than by an excessive desire for social acceptance. I discuss how being tolerated but not being truly accepted can explain the rejection of mutually beneficial trades, the choice of identity, social exclusion, marital divorce, and its implication for political correctness and affirmative action.guilt, intentions, psychological game, second-order beliefs, social interaction

Economic Analysis of Social Interactions

Economists have long been ambivalent about whether the discipline should focus on the analysis of markets or should be concerned with social interactions more generally. Recently the discipline has sought to broaden its scope while maintaining the rigor of modern economic analysis. Major theoretical developments in game theory, the economics of the family, and endogenous growth theory have taken place. Economists have also performed new empirical research on social interactions, but the empirical literature does not show progress comparable to that achieved in economic theory. This paper examines why and discusses how economists might make sustained contributions to the empirical analysis of social interactions.

Tax Evasion and Social Interactions

The paper extends the standard tax evasion model by allowing for social interactions. In Manski's (1993) nomenclature, our model takes into account social conformity effects (i.e., endogenous interactions), fairness effects (i.e., exogenous interactions) and sorting effects (i.e., correlated effects). Our model is tested using experimental data. Participants must decide how much income to report given their tax rate and audit probability, and given those faced by the other members of their group as well as their mean reported income. The estimation is based on a two-limit simultaneous tobit with fixed group effects. A unique social equilibrium exists when the model satisfies coherency conditions. In line with Brock and Durlauf (2001b), the intrinsic nonlinearity between individual and group responses is sufficient to identify the model without imposing any exclusion restrictions. Our results are consistent with fairness effects but reject social conformity and correlated effects.social interactions; tax evasion; simultaneous tobit; laboratory experiments