Chapter 5 Application and Computation of a Flexible Class of Network Formation Models

This chapter discusses the empirical application of a class of strategic network formation models, using the approach to identification introduced by de Paula, Richards-Shubik, and Tamer (2018) . The author emphasizes the interplay between model specification and computational complexity, and suggests tactics to make empirically realistic models become tractable. Two detailed examples, on friendship networks and coauthorship networks, are used to illustrate these issues and to demonstrate the performance of the approach with both simulation and empirical evidence. Also, the author presents extensions to the estimation method, which expand the potential range of applications, and which provide statistical inference with minimal computational burden.