Title: Discrete Games in Endogenous Networks: Equilibria and Policy,
Abstract: In games of friendship links and behaviors, I propose $k$-player Nash
stability---a family of equilibria, indexed by a measure of robustness given by
the number of permitted link changes, which is (ordinally and cardinally)
ranked in a probabilistic sense. Application of the proposed framework to
adolescents' tobacco smoking and friendship decisions suggests that: (a.)
friendship networks respond to increases of tobacco prices and this response
amplifies the intended policy effect on smoking, (b.) racially desegregating
high-schools, via stimulating the social interactions of students with
different intrinsic propensity to smoke, decreases the overall smoking
prevalence, (c.) adolescents are averse to sharing friends so that there is a
rivalry for friendships, (d.) when data on individuals' friendship network is
not available, the importance of price centered policy tools is underestimated.