Multinomial Choice with Social Interactions: Occupations in Victorian London

joint with José Alberto Guerra

We study a multinomial choice model within an incomplete social network. Individuals form heterogeneous rational expectations about their peers’ behaviours taking into account their characteristics and the strength of their ties. We show the network conditions under which the endogenous, exogenous and correlated effects can be identified. Conditions for unique equilibrium are established. We apply our empirical model to occupational choice in Victorian London. We use ecclesiastical parishes boundaries as proxies for social groups and geographic distances as measures of the strength of ties. Our results show important endogenous effects and uncover distinct effects by occupation type.