Social interactions refer to particular forms of externalities, in which the actions of a reference group affect an individual's preferences. In the presence of strategic complementarities, social interactions help reconcile the observation of large differences in outcomes in the absence of commensurate differences in fundamentals. This article surveys the theoretical literature and discusses different approaches to estimating social interactions.
CITATION STYLE
Scheinkman, J. A. (2018). Social Interactions (Theory). In The New Palgrave Dictionary of Economics (pp. 12552–12558). Palgrave Macmillan UK. https://doi.org/10.1057/978-1-349-95189-5_2422
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