We develop a model that shows that, at the Nash equilibrium, the outcome of each individual embedded in a network is proportional to his/her Katz-Bonacich centrality measure. This measure takes into account both direct and indirect friends of each individual, but puts less weight to his/her distant friends. We then bring the model to the data using a very detailed dataset of adolescent friendship networks. We show that, after controlling for observable individual characteristics and unobservable network specific factors, a standard deviation increase in the Katz-Bonacich centrality increases the pupil school performance by more than 7% of one standard deviation.

We study the profitability of traders in two fully electronic and highly liquid markets: the Dow and Standard & Poor׳s 500 e-mini futures markets. Using unique information that identify counterparties to a transaction, we show and seek to explain the fact that the network pattern of trades captures the relations between behavior in the market and returns. Our approach includes a simple representation of how much a shock is amplified by the network and how widely it is transmitted. This representation provides a possible shorthand for understanding the consequences of a fat-finger trade, a withdrawing of liquidity, or other market shock.

This paper studies how interest groups allocate campaign contributions when congressmen are connected by social ties. We establish conditions for the existence of a unique Nash equilibrium in pure strategies for the contribution game and characterize the associated allocation of the interest groups’ moneys. While the allocations are generally complex functions of the environment (the voting function, the legislators’ preferences, and the social network topology), they are simple, monotonically increasing functions of the respective legislators’ Katz-Bonacich centralities. Using data on the 109th–113th Congresses and on congressmen’s alumni connections, we estimate the model and find evidence supporting its predictions.

We study the effect of hearing cases alongside female judicial colleagues on the probability that a federal judge hires a female law clerk. Federal judges are assigned to judicial panels at random and have few limitations on their choices of clerks. Using a unique dataset of federal case records merged with judicial hiring information, we find a significant effect of the fraction of copanelists who are female on a male judge’s likelihood of hiring a female clerk. This finding suggests that increases in the diversity of the upper rungs of a profession can create opportunities at the entry level.

Abstract We present a model of endogenous network formation to recover unobserved social networks using only observable outcomes. We propose a novel equilibrium concept that allows for a sharp characterization of equilibrium behaviour and that yields a unique prediction under testable conditions. While the equilibrium is characterized by a large number of non-linear equations, we show that it can be efficiently employed to recover the networks by an appropriately designed approximate Bayesian computation method. We apply the model to recover the network of social links between lawmakers in the U.S. Congress using data from the 109th to 113th legislatures. We show that social connections are important for legislators’ productivities, and we identify some of the key determinants of network centralities in the U.S. Congress.

This paper uses the universe of cellphone records from a Chinese telecommunication provider for a northern Chinese city to examine the role of information exchange in urban labor markets. We provide the first direct evidence of increased communication among referral pairs around job changes. Information provided by social contacts mitigates information asymmetry and improves labor market performance. (JEL D82, J62, O18, P23, P25, R23, Z13)