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Homophily in Peer Groups

  • Mariagiovanna Baccara
  • Leeat Yariv
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    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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    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
    Contact details of provider: Web page: https://www.aeaweb.org/aej-micro
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    1. Demange, G., 1991. "Intermediate Preferences and Stable Coalition Structures," DELTA Working Papers 91-16, DELTA (Ecole normale supérieure).
    2. Sergio Currarini & Matthew O. Jackson & Paolo Pin, 2009. "An Economic Model of Friendship: Homophily, Minorities, and Segregation," Econometrica, Econometric Society, vol. 77(4), pages 1003-1045, 07.
    3. Bogomolnaia, Anna & Le Breton, Michel & Savvateev, Alexei & Weber, Shlomo, 2006. "Stability under Unanimous Consent, Free Mobility and Core," IDEI Working Papers 413, Institut d'Économie Industrielle (IDEI), Toulouse.
    4. 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.
    5. Bruce Sacerdote & David Marmaros, 2005. "How Do Friendships Form?," NBER Working Papers 11530, National Bureau of Economic Research, Inc.
    6. Topa, Giorgio, 1997. "Social Interactions, Local Spillovers and Unemployment," Working Papers 97-17, C.V. Starr Center for Applied Economics, New York University.
    7. Conley, T.G. & Udry, C.R., 2000. "Learning about a New Technology: Pineapple in Ghana," Papers 817, Yale - Economic Growth Center.
    8. Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64, pages 416.
    9. 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.
    10. Charles F. Manski, 2000. "Economic Analysis of Social Interactions," NBER Working Papers 7580, National Bureau of Economic Research, Inc.
    11. 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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