Equilibrium homophily in networks
Vincent Boucher ()
European Economic Review, 2020, vol. 123, issue C
I look at the equilibrium effects of homophily in network formation games having positive externalities. I show that very weak preferences for network effects (such as a preference for being part of a clique) may result in very high levels of homophily at equilibrium. I present an empirical procedure that allows an evaluation of the role of network effects on the observed level of homophily in the data. I apply my method to the formation of friendship networks in the USA. I show that network effects are small and have a negligible contribution to the observed racial homophily in friendship networks.
Keywords: Homophily; Network formation; Supermodular games; Approximate Bayesian computation (search for similar items in EconPapers)
JEL-codes: D85 C11 C15 C72 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:123:y:2020:i:c:s0014292120300027
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