Network Formation and Peer Effects in the USAFA

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The PIs propose to study the formation of social networks. The project contains two components, one empirical, and one methodological. In the empirical component the PIs plan to collect new data on friendship links from cadets at the United States Airforce Academy (USAFA). These data will permit the PIs to investigate the mechanisms underlying peer effects. Earlier work by Carrell and West demonstrated, through randomized assignment of cadets to squadrons, the presence of peer effects. Their work suggested that cadets benefit from the presence in their squadron of other cadets who have slightly higher academic performance. Here the PIs will investigate the mechanisms behind these effects, and in particular whether those effects work through the formation of friendships and social networks.In the methodological component, the PIs plan to develop a new structural model for network formation in a finite population and develop Bayesian methods for conducting inference for such models. The model is a strategic model of network formation, which assumes that, starting with an empty network, a sequence of opportunities arises for pairs of individuals to form friendship links. Given the opportunity, both potential friends evaluate the utility they get from the link, given their and their friends' characteristics, and given the state of the network, and decide to form a friendship or not. After a sequence of opportunities the network is finalized. These models will allow for homophily where links are more likely to be form between similar individuals. The random assignment of cadets to the squadrons will allow the PIs to assess causal effects on network formation, e.g., whether changing the composition of the group affects the number of friendships and the degree of community in the squadron. A novel feature of these models is that the PIs allow the utility of a friendship link to depend on the number and nature of friendships already established.Broader Impacts:The study of social networks has become widespread in many disciplines. In this cross-disciplinary proposal with economists and a sociologist, the PIs plan to develop and illustrate new methods that will be of use for a variety of areas where social networks are studied.