The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Social Interactions (Theory)

  • José A. Scheinkman
Reference work entry


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.


Conspicuous consumption Critical mass model Discrete choice models Interactive particle system Multiple equilibria Neighbours and neighbourhoods Network formation Non-market interactions Peer groups Public Use Microsample Area (PUMA) Random field model Residential segregation Schelling, T. Social interactions Social learning Social multiplier Spatial clustering Statistical mechanics Strategic complementarities Tipping models Urban agglomeration Veblen, T. 

JEL Classifications

This is a preview of subscription content, log in to check access.



Research supported by the National Science Foundation through grant SES 0350770. I thank Alberto Bisin, Aureo de Paula, Ed Glaeser, and Yannis Ioannides for comments.


  1. Akerlof, G. 1980. A theory of social customs of which unemployment may be one consequence. Quarterly Journal of Economics 94: 749–775.CrossRefGoogle Scholar
  2. Arthur, W. 1989. Increasing returns, competing technologies and lock-in by historical small events: The dynamics of allocation under increasing returns to scale. Economic Journal 99: 116–131.CrossRefGoogle Scholar
  3. Bala, V., and S. Goyal. 2000. A non-cooperative model of network formation. Econometrica 68: 1181–1229.CrossRefGoogle Scholar
  4. Becker, G., and K. Murphy. 2001. Social markets: Market behavior in a social environment. Cambridge, MA: Belknap-Harvard University Press.Google Scholar
  5. Benabou, R. 1993. Workings of a city: Location, education, and production. Quarterly Journal of Economics 107: 619–652.CrossRefGoogle Scholar
  6. Bewley, T. 1981. A critique of Tiebout’s theory of local public expenditures. Econometrica 49: 713–740.CrossRefGoogle Scholar
  7. Bickhchandani, S., D. Hirshleifer, and I. Welch. 1992. A theory of fads, fashion, custom, and cultural exchange as information cascades. Journal of Political Economy 100: 992–1026.CrossRefGoogle Scholar
  8. Bisin, A., and T. Verdier. 2000. Beyond the melting pot: Cultural transmission, marriage, and the evolution of ethnic and religious traits. Quarterly Journal of Economics 115: 955–988.CrossRefGoogle Scholar
  9. Blume, L. 1993. The statistical mechanics of strategic interaction. Games and Economic Behavior 5: 387–424.CrossRefGoogle Scholar
  10. Blume, L., and S. Durlauf. 1999. Equilibrium concepts for models with social interactions. Mimeo: Cornell University.Google Scholar
  11. Boorman, S. 1975. A combinatorial optimization model for transmission of job information through contact networks. Bell Journal of Economics 6: 216–249.CrossRefGoogle Scholar
  12. Brock, W. 1993. Pathways to randomness in the economy: Emergent nonlinearity and chaos in economics and finance. Estudios Economicos 81: 3–55.Google Scholar
  13. Brock, W., and S. Durlauf. 2000. Interactions-based models. In Handbook of econometrics, ed. J. Heckman and E. Learnerx. Amsterdam: North-Holland.Google Scholar
  14. Brock, W., and S. Durlauf. 2001. Discrete choice with social interactions. Review of Economic Studies 68: 235–260.CrossRefGoogle Scholar
  15. Case, A. and Katz, L. 1991. The company you keep: The effects of family and neighborhood on disadvantaged families. Working Paper No. 3705. Cambridge, MA: NBER.Google Scholar
  16. Conley, T., and G. Topa. 2002. Socio-economic distance and spatial patterns in unemployment. Journal of Applied Econometrics 17: 303–327.CrossRefGoogle Scholar
  17. Cooper, R., and A. John. 1988. Coordinating coordination failures in Keynesian models. Quarterly Journal of Economics 103: 441–464.CrossRefGoogle Scholar
  18. de Paula, A. 2005. Inference in a synchronization game with social interactions. Mimeo: Department of Economics, Princeton University.Google Scholar
  19. Duesenberry, J. 1949. Income, saving, and the theory of consumer behavior. Cambridge, MA: Harvard University Press.Google Scholar
  20. Durlauf, S. 1993. Nonergodic economic growth. Review of Economic Studies 60: 349–366.CrossRefGoogle Scholar
  21. Durlauf, S. 1996. A theory of persistent income inequality. Journal of Economic Growth 1: 75–93.CrossRefGoogle Scholar
  22. Durlauf, S. 1997. Statistical mechanics approaches to socio-economic behavior. In The economy as an evolving, complex system II, ed. W. Arthur, S. Durlauf, and D. Lane. Reading: Addison-Wesley.Google Scholar
  23. Ellison, G. 1993. Learning, local interaction and coordination. Econometrica 61: 1047–1072.CrossRefGoogle Scholar
  24. Follmer, H. 1974. Random economies with many interacting agents. Journal of Mathematical Economics 1: 51–62.CrossRefGoogle Scholar
  25. Gabszewicz, J. and Thisse, J.-F. 1986. Spatial competition and the location of firms. In Location theory, ed. R. Arnott; Fundamentals of pure and applied economics 5th ed. J. Lesourne and H. Sonnenschein. Amsterdam: Harwood Academic.Google Scholar
  26. Glaeser, E., B. Sacerdote, and J. Scheinkman. 1996. Crime and social interactions. Quarterly Journal of Economics 111: 507–548.CrossRefGoogle Scholar
  27. Glaeser, E., B. Sacerdote, and J. Scheinkman. 2003. The social multiplier. Journal of the European Economic Association 1: 345–353.CrossRefGoogle Scholar
  28. Glaeser, E., and J. Scheinkman. 2001. Measuring social interactions. In Social dynamics, ed. S. Durlauf and P. Young. Cambridge, MA: MIT Press.Google Scholar
  29. Glaeser, E., and J. Scheinkman. 2003. Non-market interactions. In Advances in economics and econometrics: Theory and applications, ed. M. Dewatripont, L. Hansen, and S. Turnovsky. Cambridge: Cambridge University Press.Google Scholar
  30. Graham, B. 2004. Identifying social interactions through excess variance contrasts. Mimeo: Harvard University.Google Scholar
  31. Granovetter, M. 1978. Threshold models of collective behavior. American Journal of Sociology 83: 1420–1443.CrossRefGoogle Scholar
  32. Horst, U., and J. Scheinkman. 2006. Equilibria in systems of social interactions. Journal of Economic Theory 130: 44–77.CrossRefGoogle Scholar
  33. Ioannides, Y. 1990. Trading uncertainty and market structure. International Economic Review 31: 619–638.CrossRefGoogle Scholar
  34. Ioannides, Y. 1997. The evolution of trading structures. In The economy as an evolving, complex system II, ed. W. Arthur, S. Durlauf, and D. Lane. Reading: Addison-Wesley.Google Scholar
  35. Ioannides, Y. 2006. Topologies of social interactions. Economic Theory 28: 559–584.CrossRefGoogle Scholar
  36. Jackson, M., and A. Wolinsky. 1996. A strategic model of economic and social networks. Journal of Economic Theory 71: 44–74.CrossRefGoogle Scholar
  37. Katz, L., A. Kling, and J. Liebman. 2001. Moving to opportunity in Boston: Early results of a randomized mobility experiment. Quarterly Journal of Economics 116: 607–654.CrossRefGoogle Scholar
  38. Kirman, A. 1983. Communication in markets: A suggested approach. Economic Letters 12: 1–5.CrossRefGoogle Scholar
  39. Kirman, A., C. Oddou, and S. Weber. 1986. Stochastic communication and coalition formation. Econometrica 54: 129–138.CrossRefGoogle Scholar
  40. Leibenstein, H. 1950. Bandwagon, snob, and Veblen effects in the theory of consumers’ demand. Quarterly Journal of Economics 64: 183–207.CrossRefGoogle Scholar
  41. Ligget, T. 1985. Interacting particle systems. New York: Springer.CrossRefGoogle Scholar
  42. Lindbeck, A. 1997. Incentives and social norms in household behavior. American Economic Review 87: 370–377.Google Scholar
  43. Loury, G. 1977. A dynamic theory of racial income differences. In Women, minorities and employment discrimination, ed. P. Wallace and A. La Mond. Lexington: Lexington Books.Google Scholar
  44. Ludwig, J., P. Hirschfeld, and G. Duncan. 2001. Urban poverty and juvenile crime: Evidence from a randomized housing-mobility experiment. Quarterly Journal of Economics 116: 665–679.CrossRefGoogle Scholar
  45. Mailath, G., L. Samuelson, and A. Shaked. 2001. Evolution and endogenous interactions. In The evolution of economic diversity, ed. U. Pagano and A. Nicita. London: Routledge.Google Scholar
  46. Manski, C. 1993. Identification of endogenous social effects: The reflection problem. Review of Economic Studies 60: 531–542.CrossRefGoogle Scholar
  47. Morris, S. 2000. Contagion. Review of Economic Studies 67: 57–78.CrossRefGoogle Scholar
  48. Mobius, M. 2000. The formation of ghettos as a local interaction phenomenon. Working Paper. Massachusetts Institute of Technology.Google Scholar
  49. Murphy, K., A. Shleifer, and R. Vishny. 1989. Industrialization and the Big Push. Journal of Political Economy 97: 1003–1026.CrossRefGoogle Scholar
  50. Myerson, R. 1991. Game theory: Analysis of conflict. Cambridge, MA: Harvard University Press.Google Scholar
  51. Pesendorfer, W. 1995. Design innovation and fashion cycles. American Economic Review 85: 771–792.Google Scholar
  52. Sacerdote, B. 2001. Peer effects with random assignment: Results for Dartmouth roommates. Quarterly Journal of Economics 116: 681–704.CrossRefGoogle Scholar
  53. Sah, R. 1991. Social osmosis and crime. Journal of Political Economy 99: 1272–1295.CrossRefGoogle Scholar
  54. Schelling, T. 1971. Dynamic models of segregation. Journal of Mathematical Sociology 1: 143–186.CrossRefGoogle Scholar
  55. Schelling, T. 1972. A process of residential segregation: Neighborhood tipping. In Racial discrimination in economic life, ed. A. Pascal. Lexington: Lexington Books.Google Scholar
  56. Schelling, T. 1978. Micromotives and macrobehavior. New York: Norton.Google Scholar
  57. Topa, G. 2001. Social interactions, local spillovers and unemployment. Review of Economic Studies 68: 261–295.CrossRefGoogle Scholar
  58. Veblen, T. 1934. The theory of the leisure class: An economic study of institutions. New York: Modern Library.Google Scholar
  59. Young, H. 1993. The evolution of conventions. Econometrica 61: 57–84.CrossRefGoogle Scholar
  60. Young, H. 1998. Individual strategy and social structure: An evolutionary theory of institutions. Princeton: Princeton University Press.Google Scholar

Copyright information

© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • José A. Scheinkman
    • 1
  1. 1.