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American Economic Journal: Microeconomics: Vol. 5 No. 3 (August 2013)

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Homophily in Peer Groups

Article Citation

Baccara, Mariagiovanna, and Leeat Yariv. 2013. "Homophily in Peer Groups." American Economic Journal: Microeconomics, 5(3): 69-96.

DOI: 10.1257/mic.5.3.69

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.

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Authors

Baccara, Mariagiovanna (Washington U in St Louis)
Yariv, Leeat (CA Institute of Technology)

JEL Classifications

D03: Behavioral Economics: Underlying Principles
D71: Social Choice; Clubs; Committees; Associations
D82: Asymmetric and Private Information; Mechanism Design
D83: Search; Learning; Information and Knowledge; Communication; Belief

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