Homophily in Peer Groups

TitleHomophily in Peer Groups
Publication TypeJournal Article
Year of Publication2013
AuthorsBaccara M, Yariv L
JournalAmerican Economic Journal: Microeconomics
Pagination - 96
Date PublishedAugust 2013
ISBN Number1945-7669, 1945-7669
KeywordsAsymmetric and Private Information, Mechanism Design (D82), Information, Micro-Based Behavioral Economics: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making (D91), Search, Learning, Information and Knowledge, Communication, Belief, Unawareness (D83), Social Choice, Clubs, Committees, Associations (D71)
AbstractThe 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.