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Economists now accept that social interactions influence the choices that consumers or producers make, and the utility or returns to inputs. The mechanism and the measurement of the influence are, however, not clear. Little academic literature exists on how social interactions influence the behavior of economic agents. Traditional theory of the consumer and of the firm ignores social influence in agent behavior. These theories are inadequate in understanding outcomes of agent behavior. This book provides insights into how social interactions can be incorporated into the theory of the firm. It analyzes social interactions among smallholder farmers in Kenya with regard to fertilizer and animal feeds usage, conservation efforts, and property rights. The analyses utilize three different econometric methods, and the results show that social interactions matter in production decisions. Ignoring them can bias the estimated parameters. The book should be especially useful to academics in universities, to professional researchers of agent behavior, to economists in planning departments in government ministries, and to any person interested in outcomes of social interactions.

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Dr. John Kamau Gathiaka studied economics at the University of Nairobi. He has taught economics at Maseno University, and presently he teaches applied and mathematical economics at the University of Nairobi, Kenya. His research interests are in applied and social economics.

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