Equilibrium Concepts for Social Interaction Models

This paper describes the relationship between two different binary choice social interaction models. The Brock and Durlauf (2001) model is essentially a static Nash equilibrium model with random utility preferences. In the Blume (forthcoming) model is a population game model similar to Blume (1993), Kandori, Mailath, and Rob (1993) and Young (1993). We show that the equilibria of the Brock-Durlauf model are steady states of a differential equation which is a deterministic approximation of the sample-path behavior of Blume’s model. Moreover, the limit distribution of this model clusters around a subset of the steady states when the population is large. Correspondent: Professor Lawrence Blume Department of Economics Uris Hall Cornell University Ithaca, NY 14853 Social Interaction Models 1