Stochastic actor oriented model with random effects

The stochastic actor oriented model (SAOM) is a method for modelling social interactions and social behaviour over time. It can be used to model drivers of dynamic interactions using both exogenous covariates and endogenous network configurations, but also the co-evolution of behaviour and social interactions. In its standard implementations, it assumes that all individual have the same interaction evaluation function. This lack of heterogeneity is one of its limitations. The aim of this paper is to extend the inference framework for the SAOM to include random effects, so that the heterogeneity of individuals can be modelled more accurately. We decompose the linear evaluation function that models the probability of forming or removing a tie from the network, in a homogeneous fixed part and a random, individual-specific part. We extend the algorithm so that the variance of the random parameters can be estimated with method of moments. Our method is applicable for the general random effect formulations. We illustrate the method with a random out-degree model and show the parameter estimation of the random components, significance tests and model evaluation. We apply the method to the Kapferer's Tailor shop study. It is shown that a random out-degree constitutes a serious alternative to including transitivity and higher-order dependency effects.