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A belief-based theory of homophily

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  • Kets, Willemien
  • Sandroni, Alvaro

Abstract

Homophily, the tendency of people to associate with people similar to themselves, is a widespread phenomenon that has important economic consequences. We endogenize players' preferences for interacting with their own group by modeling the process by which players take others' perspective. Homophily emerges because players find it easier to put themselves into the shoes of members of their own group. The model sheds light on various empirical regularities and has novel welfare implications. In particular, policies that reduce homophily may not improve social welfare.

Suggested Citation

  • Kets, Willemien & Sandroni, Alvaro, 2019. "A belief-based theory of homophily," Games and Economic Behavior, Elsevier, vol. 115(C), pages 410-435.
  • Handle: RePEc:eee:gamebe:v:115:y:2019:i:c:p:410-435
    DOI: 10.1016/j.geb.2019.04.002
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    Cited by:

    1. Simon Clark, 2020. ""You're Just My Type!" Matching and Payoffs When Like Attracts Like," Edinburgh School of Economics Discussion Paper Series 295, Edinburgh School of Economics, University of Edinburgh.
    2. Anthony Edo & Nicolas Jacquemet & Constantine Yannelis, 2019. "Language skills and homophilous hiring discrimination: Evidence from gender and racially differentiated applications," Review of Economics of the Household, Springer, vol. 17(1), pages 349-376, March.
    3. Carlos Segura-Rodriguez, "undated". "Higher Order Information Complementarities and Polarization," PIER Working Paper Archive 19-007, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
    4. Tadao Hoshino & Daichi Shimamoto & Yasuyuki Todo, 2020. "Accounting for Heterogeneity in Network Formation Behaviour: An Application to Vietnamese SMEs," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 82(5), pages 1042-1067, October.
    5. Tenev, Nicholas H, 2020. "Social Connections and Racial Wage Inequality," SocArXiv vm82w, Center for Open Science.
    6. Kets, Willemien & Sandroni, Alvaro, 2015. "Challenging Conformity: A Case for Diversity," MPRA Paper 68166, University Library of Munich, Germany.
    7. Willemien Kets & Alvaro Sandroni, 2021. "A Theory of Strategic Uncertainty and Cultural Diversity," Review of Economic Studies, Oxford University Press, vol. 88(1), pages 287-333.
    8. Trevor Kollmann & Simone Marsiglio & Sandy Suardi & Marco Tolotti, 2021. "Social interactions, residential segregation and the dynamics of tipping," Journal of Evolutionary Economics, Springer, vol. 31(4), pages 1355-1388, September.
    9. Paul A. Gompers & Kevin Huang & Sophie Q. Wang, 2017. "Homophily in Entrepreneurial Team Formation," Harvard Business School Working Papers 17-104, Harvard Business School.
    10. Bansak, Cynthia & Pearlman, Sarah, 2021. "Endogamous Marriage among Immigrant Groups: The Impact of Deportations under Secure Communities," GLO Discussion Paper Series 756, Global Labor Organization (GLO).
    11. Li, Chen & Turmunkh, Uyanga & Wakker, Peter P., 2020. "Social and strategic ambiguity versus betrayal aversion," Games and Economic Behavior, Elsevier, vol. 123(C), pages 272-287.
    12. John Duffy & Seung Han Yoo, 2022. "On the Origin of Polarization," Discussion Paper Series 2202, Institute of Economic Research, Korea University.
    13. Kets, Willemien & Kager, Wouter & Sandroni, Alvaro, 2022. "The value of a coordination game," Journal of Economic Theory, Elsevier, vol. 201(C).
    14. Herings, P. Jean-Jacques & Saulle, Riccardo & Seel, Christian, 2020. "The Last will be First, and the First Last: Segregation in Societies with Relative Payoff Concerns (RM/18/027-revised-)," Research Memorandum 011, Maastricht University, Graduate School of Business and Economics (GSBE).
    15. Kets, Willemien, 2021. "Organizational Design: Culture and Incentives," SocArXiv 3y8t4, Center for Open Science.
    16. Dieguez, Laura & Sotirov, Metodi, 2021. "FSC sustainability certification as green-lane for legality verification under the EUTR? Changes and policy learning at the interplay of private governance and public policy," Forest Policy and Economics, Elsevier, vol. 131(C).
    17. Christopher Ellis & Jon C. Thompson & Jiabin Wu, 2020. "Labor market characteristics and cultural choice," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 22(5), pages 1584-1617, September.
    18. Banerjee, Abhijit & Sequeira, Sandra, 2020. "Spatial Mismatches and Imperfect Information in the Job Search," CEPR Discussion Papers 14414, C.E.P.R. Discussion Papers.

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    More about this item

    Keywords

    Homophily; Culture; Theory of mind; Strategic uncertainty; Coordination;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D60 - Microeconomics - - Welfare Economics - - - General
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • Z1 - Other Special Topics - - Cultural Economics

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