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Homophily in Peer Groups

Author

Listed:
  • Mariagiovanna Baccara
  • Leeat Yariv

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.

Suggested Citation

  • Mariagiovanna Baccara & Leeat Yariv, 2013. "Homophily in Peer Groups," American Economic Journal: Microeconomics, American Economic Association, vol. 5(3), pages 69-96, August.
  • 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 listed on IDEAS

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    6. David Marmaros & Bruce Sacerdote, 2006. "How Do Friendships Form?," The Quarterly Journal of Economics, Oxford University Press, vol. 121(1), pages 79-119.
    7. Greenberg, Joseph & Weber, Shlomo, 1986. "Strong tiebout equilibrium under restricted preferences domain," Journal of Economic Theory, Elsevier, vol. 38(1), pages 101-117, February.
    8. Timothy G. Conley & Christopher R. Udry, 2010. "Learning about a New Technology: Pineapple in Ghana," American Economic Review, American Economic Association, vol. 100(1), pages 35-69, March.
    9. Anna Bogomolnaia & Michel Breton & Alexei Savvateev & Shlomo Weber, 2007. "Stability under unanimous consent, free mobility and core," International Journal of Game Theory, Springer;Game Theory Society, vol. 35(2), pages 185-204, January.
    10. K. R. Narayanan, 1954. "Freedom in Modern Society," India Quarterly: A Journal of International Affairs, , vol. 10(4), pages 376-381, October.
    11. Giorgio Topa, 2001. "Social Interactions, Local Spillovers and Unemployment," Review of Economic Studies, Oxford University Press, vol. 68(2), pages 261-295.
    12. 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, July.
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    Citations

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    Cited by:

    1. Andreas Bjerre-Nielsen, 2015. "Sorting in Networks: Adversity and Structure," Papers 1503.07389, arXiv.org, revised Aug 2017.
    2. Catia Batista & Francesco Cestari, 2016. "Migrant intentions to return: The role of migrant social networks," NOVAFRICA Working Paper Series wp1602, Universidade Nova de Lisboa, Faculdade de Economia, NOVAFRICA.
    3. Matthew O. Jackson, 2014. "Networks in the Understanding of Economic Behaviors," Journal of Economic Perspectives, American Economic Association, vol. 28(4), pages 3-22, Fall.
    4. repec:eee:jeborg:v:136:y:2017:i:c:p:186-202 is not listed on IDEAS
    5. Pengfei Liu & Stephen K. Swallow & Christopher M. Anderson, 2016. "Threshold-Level Public Goods Provision with Multiple Units: Experimental Effects of Disaggregated Groups with Rebates," Land Economics, University of Wisconsin Press, vol. 92(3), pages 515-533.
    6. Catia Batista & Francesco Cestari, 2016. "Migrant intentions to return: The role of migrant social networks," FEUNL Working Paper Series novaf:wp1602, Universidade Nova de Lisboa, Faculdade de Economia.
    7. Baccara, Mariagiovanna & Yariv, Leeat, 2016. "Choosing peers: Homophily and polarization in groups," Journal of Economic Theory, Elsevier, vol. 165(C), pages 152-178.
    8. Currarini, Sergio & Matheson, Jesse & Vega-Redondo, Fernando, 2016. "A simple model of homophily in social networks," European Economic Review, Elsevier, vol. 90(C), pages 18-39.
    9. Proto, Eugenio & Sgroi, Daniel, 2017. "Biased beliefs and imperfect information," Journal of Economic Behavior & Organization, Elsevier, vol. 136(C), pages 186-202.
    10. Dimant, Eugen, 2015. "On Peer Effects: Behavioral Contagion of (Un)Ethical Behavior and the Role of Social Identity," MPRA Paper 68732, University Library of Munich, Germany.

    More about this item

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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