Homophily in network formation and social coordination

Zhiwei Cui and Jinhua Liu

Economics Letters, 2024, vol. 238, issue C

Abstract: We consider a model in which agents choose a limited number of partners to play a 2 × 2 coordination game. We explore the role of homophily in network formation. Specifically, agents are distributed over a circle, in which the shorter the distance between two agents the more similar they are. Agents tend to form links with more similar agents. We find that if linking constraint is small enough with respect to the size of agents that they can possibly interact with, all agents will choose payoff-dominant action in the long run; otherwise, all agents will choose risk-dominant action in the long run.

Keywords: Social coordination; Homophily; Network formation (search for similar items in EconPapers)
JEL-codes: C72 D83 D85 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:238:y:2024:i:c:s016517652400212x

DOI: 10.1016/j.econlet.2024.111729

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