A Structural Model for the Coevolution of Networks and Behavior

Michael Konig, C.S. Hsieh, X. Liu

Research output: Working paperProfessional

Abstract

This paper introduces a structural model for the coevolution of networks and behavior. The microfoundation of our model is a network game where agents adjust actions and network links in a stochastic best-response dynamics with a utility function allowing for both strategic externalities and unobserved heterogeneity. We show the network game admits a potential function and the coevolution process converges to a unique stationary distribution characterized by a Gibbs measure. To bypass the evaluation of the intractable normalizing constant in the Gibbs measure, we adopt the Double Metropolis-Hastings algorithm to sample from the posterior distribution of the structural parameters. To illustrate the empirical relevance of our structural model, we apply it to study R&D investment and collaboration decisions in the chemicals and pharmaceutical industry and find a positive knowledge spillover effect. Finally, our structural model provides a tractable framework for a long-run key player analysis.
Original languageEnglish
PublisherCEPR
VolumeDP13911
Publication statusPublished - 2019

Publication series

NameCEPR Discussion Paper
ISSN (Print)1442-8636

Fingerprint

Coevolution
Structural model
Network games
Structural parameters
Metropolis-Hastings algorithm
Microfoundations
Potential function
Chemical industry
Pharmaceutical industry
Utility function
Knowledge spillovers
Externalities
Unobserved heterogeneity
Spillover effects
Posterior distribution
Best response dynamics
Stationary distribution
Evaluation

Cite this

Konig, M., Hsieh, C. S., & Liu, X. (2019). A Structural Model for the Coevolution of Networks and Behavior. (CEPR Discussion Paper). CEPR.
Konig, Michael ; Hsieh, C.S. ; Liu, X. / A Structural Model for the Coevolution of Networks and Behavior. CEPR, 2019. (CEPR Discussion Paper).
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Konig, M, Hsieh, CS & Liu, X 2019 'A Structural Model for the Coevolution of Networks and Behavior' CEPR Discussion Paper, CEPR.

A Structural Model for the Coevolution of Networks and Behavior. / Konig, Michael; Hsieh, C.S.; Liu, X.

CEPR, 2019. (CEPR Discussion Paper).

Research output: Working paperProfessional

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Konig M, Hsieh CS, Liu X. A Structural Model for the Coevolution of Networks and Behavior. CEPR. 2019. (CEPR Discussion Paper).