Stability and Segregation in Group Formation

Igal Milchtaich () and Eyal Winter ()

Discussion Paper Series from The Federmann Center for the Study of Rationality, the Hebrew University, Jerusalem

Abstract: This paper presents a model of group formation based on the assumption that individuals prefer to associate with people similar to them. It is shown that, in general, if the number of groups that can be formed is bounded, then a stable partition of the society into groups may not exist. A partition is defined as stable if none of the individuals would prefer be in a different group than the one he is in. However, if individuals’ characteristics are one-dimensional, then a stable partition always exists. We give sufficient conditions for stable partitions to be segregating (in the sense that, for example, low-characteristic individuals are in one group and high-characteristic ones are in another) and Pareto efficient. In addition, we propose a dynamic model of individual myopic behavior describing the evolution of group formation to an eventual stable, segregating, and Pareto efficient partition.

Keywords: group formation; coalition structure; local public goods; segregation; myopic optimization; weak acyclicity (search for similar items in EconPapers)
JEL-codes: C72 H41 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2000-04
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published in Games and Economic Behavior, 2002, vol. 38, pp. 318-346.

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Journal Article: Stability and Segregation in Group Formation (2002)
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