The effect of density on the level of bias in the network autocorrelation model

Researchers interested in the effects of social network ties on behavior are increasingly turning to the network autocorrelation model, which allows for the simultaneous computation of individual-level and network-level effects. Earlier research, however, had pointed to the possibility that the maximum likelihood estimates used to compute the network autocorrelation model yielded negatively biased parameter estimates. In this paper we use simulations to examine whether – and the conditions under which – a negative bias exists. We show that the network parameter estimate ρ is negatively biased under nearly all conditions, and that this bias becomes more severe at higher levels of both ρ and network density. We conclude by discussing the implications of these findings for researchers planning to use the network autocorrelation model.