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How (not) to Choose Peers in Studying Groups


  • Thomas Gall

    (University of Bonn)

  • Roland Amann

    (University of Konstanz)


This paper analyzes social group formation when agents are subject to peer effects within groups increasing human capital and instantaneous utility. When agents are heterogeneous on two dimensions, ability and social skills, and monetary payments are not feasible the model predicts segregation at the top and at the bottom of the attribute space and bunching for heterogeneous intermediate types. Groups may be heterogeneous in taste types and more heterogeneous types are more likely to participate. The equilibrium allocation does not induce cost-efficient human capital accumulation. Introducing ability tracking may produce beneficial results despite decreasing differences in human capital production.

Suggested Citation

  • Thomas Gall & Roland Amann, 2006. "How (not) to Choose Peers in Studying Groups," Working Papers 2006.79, Fondazione Eni Enrico Mattei.
  • Handle: RePEc:fem:femwpa:2006.79

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    References listed on IDEAS

    1. Conley, John P. & Wooders, Myrna H., 2001. "Tiebout Economies with Differential Genetic Types and Endogenously Chosen Crowding Characteristics," Journal of Economic Theory, Elsevier, vol. 98(2), pages 261-294, June.
    2. Jacob M. Markman & Eric A. Hanushek & John F. Kain & Steven G. Rivkin, 2003. "Does peer ability affect student achievement?," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 18(5), pages 527-544.
    3. Gordon Winston & David Zimmerman, 2004. "Peer Effects in Higher Education," NBER Chapters,in: College Choices: The Economics of Where to Go, When to Go, and How to Pay For It, pages 395-424 National Bureau of Economic Research, Inc.
    4. Epple, Dennis & Newlon, Elizabeth & Romano, Richard, 2002. "Ability tracking, school competition, and the distribution of educational benefits," Journal of Public Economics, Elsevier, vol. 83(1), pages 1-48, January.
    5. Kaneko, Mamoru & Wooders, Myrna Holtz, 1986. "The core of a game with a continuum of players and finite coalitions: The model and some results," Mathematical Social Sciences, Elsevier, vol. 12(2), pages 105-137, October.
    6. Caroline M. Hoxby, 2000. "The Effects of Class Size on Student Achievement: New Evidence from Population Variation," The Quarterly Journal of Economics, Oxford University Press, vol. 115(4), pages 1239-1285.
    7. Esfandiar Maasoumi & Daniel Millimet & Vasudha Rangaprasad, 2005. "Class Size and Educational Policy: Who Benefits from Smaller Classes?," Econometric Reviews, Taylor & Francis Journals, vol. 24(4), pages 333-368.
    8. James J. Heckman & Jora Stixrud & Sergio Urzua, 2006. "The Effects of Cognitive and Noncognitive Abilities on Labor Market Outcomes and Social Behavior," Journal of Labor Economics, University of Chicago Press, vol. 24(3), pages 411-482, July.
    9. Becker, Gary S, 1973. "A Theory of Marriage: Part I," Journal of Political Economy, University of Chicago Press, vol. 81(4), pages 813-846, July-Aug..
    10. David J. Zimmerman, 2003. "Peer Effects in Academic Outcomes: Evidence from a Natural Experiment," The Review of Economics and Statistics, MIT Press, vol. 85(1), pages 9-23, February.
    11. Kaneko, Mamoru & Wooders, Myrna Holtz, 1996. "The Nonemptiness of the f-Core of a Game without Side Payments," International Journal of Game Theory, Springer;Game Theory Society, vol. 25(2), pages 245-258.
    12. Bruce Sacerdote, 2001. "Peer Effects with Random Assignment: Results for Dartmouth Roommates," The Quarterly Journal of Economics, Oxford University Press, vol. 116(2), pages 681-704.
    13. Donald Robertson & James Symons, 2003. "Do Peer Groups Matter? Peer Group versus Schooling Effects on Academic Attainment," Economica, London School of Economics and Political Science, vol. 70(277), pages 31-53, February.
    14. Nicole Schneeweis & Rudolf Winter-Ebmer, 2007. "Peer effects in Austrian schools," Empirical Economics, Springer, vol. 32(2), pages 387-409, May.
    15. McEwan, Patrick J., 2003. "Peer effects on student achievement: evidence from Chile," Economics of Education Review, Elsevier, vol. 22(2), pages 131-141, April.
    16. Shubik, Martin & Wooders, Myrna Holtz, 1983. "Approximate cores of replica games and economies : Part II: Set-up costs and firm formation in coalition production economies," Mathematical Social Sciences, Elsevier, vol. 6(3), pages 285-306, December.
    17. Epple, Dennis & Romano, Richard E, 1998. "Competition between Private and Public Schools, Vouchers, and Peer-Group Effects," American Economic Review, American Economic Association, vol. 88(1), pages 33-62, March.
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    More about this item


    Education; Peer-effects; Matching; Group Formation;

    JEL classification:

    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies

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