(Universita di Venezia)
Abstract: We study linear quadratic games played on a social network where interaction is of the strategic complement type between neighbors and of the substitute type between agents at distance two. We provide micro-founded economic problems where this patter of interaction applies, and where distance-two substitution is due to a local congestion effect. We show that the introduction of distance-two substitution helps explain empirical evidence where strong positive correlation in behavior goes alongside with behavioural patterns not implied by a model of peer effects alone. In particular, we show that distance-two substitution explains the marginalization of smokers in social networks (see Christakis and Fowler, 2008), the non-monotonic relation between network density and behavior in industrial districts (see Shaver and Flyer, 2000), and some controversial evidence about the e ffects of network segregation on the polarization of behavior. We conclude by discussing the implications of considering indirect substitution for the identication of peer eff ects in empirical analyses.
P.S: The seminar will be held in English.