A Discrete-Choice Approach to Modeling Social Influence on Individual Decision Making

Abstract

Individual decision making is commonly studied using discrete choice models. Models of this type are applied extensively to the study of travel behavior, residential location, and employment decisions, among other topics of interest. A notable characteristic of the underlying economic theory is the assumption that individuals seek to maximize utility on the basis of their personal attributes and the attributes of the alternatives available to them. This approach ignores the interrelated nature of decision making in social situations—in other words, the role that social structures play in shaping behavior. In this paper we describe a multinomial discrete choice approach to analyzing individual behavior in social situations where position in a social network may encourage or discourage different courses of action. By means of a simulation example, we explore some properties of the model, in particular the effect of network topology.