Making friends: The role of assortative interests and capacity constraints

Antonio Jimenez-Martinez and Isabel Melguizo

Journal of Economic Behavior & Organization, 2022, vol. 203, issue C, 431-465

Abstract: We study friendship networks under the assumption that people are constrained to build the qualities of their relations. We investigate the connection between (exogenous) assortative interests and (endogenous) homophilic patterns, and its welfare implications. Under a simple link formation technology, capacity constraints bolster an interesting mechanism that leads to asymmetric investments in the formation of links and, furthermore, makes relatively good-quality heterophilic relations necessary for extreme forms of homophilic patterns to be stable. For intermediate assortative interests, extreme forms of either homophilic (or heterophilic) patterns may coexist with more moderate forms. We present empirical evidence on the identified features of stable patterns. Efficiency requires common aggregate qualities of relations across all agents within each different population group. Although efficiency of stable patterns needs not follow in general, we identify particular forms of extreme stable homophilic and heterophilic patterns that are efficient. Additionally, we identify a class of patterns that feature intermediate levels of homophily, and for which stability and efficiency are compatible. Such particular constructions provide insightful guidance on the role of population sizes to facilitate efficiency of stable patterns.

Keywords: Friendship networks; Assortative interests; Homophily; Heterophily; Diversity; Integration (search for similar items in EconPapers)
JEL-codes: A14 D01 D71 D85 J15 Z13 (search for similar items in EconPapers)
Date: 2022
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Working Paper: Making friends: the role of assortative interests and capacity constraints (2022)
Working Paper: Making Friends: the Role of Assortative Interests and Capacity Constraints (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:203:y:2022:i:c:p:431-465

DOI: 10.1016/j.jebo.2022.09.016

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