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Homophily and Specialization in Networks

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  • Patrick Allmis
  • Luca Paolo Merlino

Abstract

In this paper, players contribute to two local public goods for which they have different tastes and sponsor costly links to enjoy the provision of others. In equilibrium, either there are several contributors specialized in public good provision or only two contributors who are not entirely specialized. Higher linking costs have a non-monotonic impact on welfare and polarization, as they affect who specializes in public good provision. When the available budget is small, subsidies should be given to players who already specialize in public good provision; otherwise, they should target only one player who specializes in public good provision.

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  • Patrick Allmis & Luca Paolo Merlino, 2023. "Homophily and Specialization in Networks," Papers 2312.00457, arXiv.org.
    • Handle: RePEc:arx:papers:2312.00457
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    References listed on IDEAS

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