Homophily in peer groups

Mariagiovanna Baccara, Leeat Yariv

Research output: Contribution to journalArticle

12 Scopus citations

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. (JEL D03, D71, D82, D83).

Original languageEnglish (US)
Pages (from-to)69-96
Number of pages28
JournalAmerican Economic Journal: Microeconomics
Volume5
Issue number3
DOIs
StatePublished - Aug 27 2013
Externally publishedYes

All Science Journal Classification (ASJC) codes

  • Economics, Econometrics and Finance(all)

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