Peer pressure and social networks are powerful influences on behaviour. The focus of this thesis is studying the channels through which social networks impact individuals’ choices and outcomes in three different contexts.The first paper of this thesis (Chapter 2) develops a theoretical network-based model of Twitter, formulating individual interaction as a dynamic game in which heterogenous agents choose a ‘niche’ to tweet in, and whom to follow. By characterizing the stable networks that the dynamic Markov process converges to, we show that information does not diffuse as widely as one might expect: although many agents are directly or indirectly connected to each other, agents strategically filter information in accordance with their niche.The second paper of this thesis (Chapter 3) presents a social network model of criminal activity, where agents’ payoffs depend on the structure of their connections with each other. The Nash equilibria in crime activity are characterized, and the theoretical results are used to identify the optimal network, which maximize the sum of agents’ payoffs, by searching over all possible non-isomorphic graphs of given size. In addition, the effects of different anti-crime policies on the optimal crime network structure and the overall crime level are analyzed and presented.The third paper of this thesis (Chapter 4) studies the direct and spillover effects of social interactions on fundraising and engagement activities in a network of volunteers from Engineers Without Borders, Canada. The network effects are modelled through two separate channels: a strategic interaction term which affects the marginal benefit from supplying effort and a direct spillover term affecting the level of payoff. This model is estimated using several online and offline networks via instrumental variables and system GMM. The results always present large significant levels of strategic complementarities in fundraising activities. However, in engagement activities, strategic complementarities are only significant in online networks. Additionally, engagement activities exhibit positive significant levels of direct spillovers for all networks. In contrast, in fundraising campaigns, the direct spillover effect is only significant in large offline networks.
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Thesis advisor: Karaivanov, Alexander
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