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Homophily in Peer Groups

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  • Mariagiovanna Baccara
  • Leeat Yariv
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    Abstract

    The focus of this paper is the endogenous formation of peer groups. In our model agents choose peers before making contributions to public projects, and they differ in how much they value one project relative to another. Thus, the group's preference composition affects the type of contributions made. We characterize stable groups and find that they must be sufficiently homogeneous. We also provide conditions for some heterogeneity to persist as the group size grows large. In an application in which the projects entail information collection and sharing within the group, stability requires more similarity among extremists than among moderate individuals.

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    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/mic.5.3.69
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    File URL: http://www.aeaweb.org/aej/mic/ds/august2013/2011-0041_ds.zip
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    Bibliographic Info

    Article provided by American Economic Association in its journal American Economic Journal: Microeconomics.

    Volume (Year): 5 (2013)
    Issue (Month): 3 (August)
    Pages: 69-96

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    Handle: RePEc:aea:aejmic:v:5:y:2013:i:3:p:69-96

    Note: DOI: 10.1257/mic.5.3.69
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    References

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    1. Sergio Currarini & Paolo Pin & Matthew O. Jackson, 2007. "An Economic Model of Friendship: Homophily, Minorities and Segregation," Working Papers 2007_20, Department of Economics, University of Venice "Ca' Foscari".
    2. Mark Rosenzweig & Andrew D. Foster, . "Learning by Doing and Learning from Others: Human Capital and Technical Change in Agriculture," Home Pages _068, University of Pennsylvania.
    3. Demange, G., 1991. "Intermediate Preferences and Stable Coalition Structures," DELTA Working Papers 91-16, DELTA (Ecole normale supérieure).
    4. Timothy G. Conley & Christopher R. Udry, 2005. "Learning about a new technology: pineapple in Ghana," Proceedings, Federal Reserve Bank of San Francisco.
    5. David Marmaros & Bruce Sacerdote, 2006. "How Do Friendships Form?," The Quarterly Journal of Economics, MIT Press, vol. 121(1), pages 79-119, 02.
    6. Topa, Giorgio, 2001. "Social Interactions, Local Spillovers and Unemployment," Review of Economic Studies, Wiley Blackwell, vol. 68(2), pages 261-95, April.
    7. BOGOMOLNAIA, Anna & LE BRETON, Michel & SAVVATEEV, Alexei & WEBER, Shlomo, 2006. "Stability under unanimous consent, free mobility and core," CORE Discussion Papers 2006007, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    8. Charles F. Manski, 2000. "Economic Analysis of Social Interactions," NBER Working Papers 7580, National Bureau of Economic Research, Inc.
    9. repec:att:wimass:9127 is not listed on IDEAS
    10. Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64, pages 416.
    11. Manski, Charles F, 1993. "Identification of Endogenous Social Effects: The Reflection Problem," Review of Economic Studies, Wiley Blackwell, vol. 60(3), pages 531-42, July.
    12. Greenberg, Joseph & Weber, Shlomo, 1986. "Strong tiebout equilibrium under restricted preferences domain," Journal of Economic Theory, Elsevier, vol. 38(1), pages 101-117, February.
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