Estimation of peer pressure in dynamic homogeneous social networks

Abstract

Social interaction with peer pressure is widely studied in social network analysis. Game theory can be utilized to model dynamic social interaction and one class of game network models assumes that peopleos decision payoff functions hinge on individual covariates and the choices of their friends. However, peer pressure would be misidentified and induce a non-negligible bias when incomplete covariates are involved in the game model. For this reason, we develop a generalized constant peer effects model based on homogeneity structure in dynamic social networks. The new model can effectively avoid bias through homogeneity pursuit and can be applied to a wider range of scenarios. To estimate peer pressure in the model, we first present two algorithms based on the initialize expand merge method and the polynomial-time two-stage method to estimate homogeneity parameters. Then we apply the nested pseudo-likelihood method and obtain consistent estimators of peer pressure. Simulation evaluations show that our proposed methodology can achieve desirable and effective results in terms of the community misclassification rate and parameter estimation error. We also illustrate the advantages of our model in the empirical analysis when compared with a benchmark model.