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Homophily in network formation and social coordination

Author

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  • Cui, Zhiwei
  • Liu, Jinhua

Abstract

We consider a model in which agents choose a limited number of partners to play a 2 × 2 coordination game. We explore the role of homophily in network formation. Specifically, agents are distributed over a circle, in which the shorter the distance between two agents the more similar they are. Agents tend to form links with more similar agents. We find that if linking constraint is small enough with respect to the size of agents that they can possibly interact with, all agents will choose payoff-dominant action in the long run; otherwise, all agents will choose risk-dominant action in the long run.

Suggested Citation

  • Cui, Zhiwei & Liu, Jinhua, 2024. "Homophily in network formation and social coordination," Economics Letters, Elsevier, vol. 238(C).
    • Handle: RePEc:eee:ecolet:v:238:y:2024:i:c:s016517652400212x
    DOI: 10.1016/j.econlet.2024.111729
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    More about this item

    Keywords

    Social coordination; Homophily; Network formation;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation

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