A discrete choice model with social interactions; with an application to high school teen behavior

We develop an empirical discrete choice interaction model with a finite number of agents. We characterize its equilibrium properties - in particular the correspondence between the interaction strength, the number of agents, and the set of equilibria - and propose to estimate the model by means of simulation methods. In an empirical application, we analyze the individual behavior of some 8000 high school teenagers from almost 500 different school classes. We find endogenous social interaction effects to be strong for behavior closely related to school (truancy), somewhat weaker for behavior partly related to school (smoking, cell phone ownership, and moped ownership) and absent for behavior far away from school (asking parents' permission for purchases). Intra-gender interactions are generally much stronger than cross-gender interaction