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On the Origin of Polarization

John Duffy and Seung Han Yoo

No 2202, Discussion Paper Series from Institute of Economic Research, Korea University

Abstract: We provide a dynamic, spatial model of group sorting and polarization based on observable group identity alone. Agents, who belong to one of two perfectly observable groups, are randomly matched to play an investment game in youth and old age, and make a location decision in between. Each agent’s ability is private information and the true distribution of each group’s of abilities (types) is uncertain, so agents have to form beliefs about these distributions in making both investment and location decisions. Further, agents have no preferences or special facilities for interacting with members of their own group. We characterize the equilibrium for this endogenous, dynamic spatial location model which involves the formation of higher order perceptions and we show that under certain conditions, a limiting outcome of the dynamical system is that the society becomes completely polarized with members of each group rationally choosing to congregate in distinct locations.

Keywords: Polarization; group bias; homophily; private monitoring; sorting; Bayesian learning. (search for similar items in EconPapers)
JEL-codes: C72 C73 D83 (search for similar items in EconPapers)
Date: 2022
New Economics Papers: this item is included in nep-cdm, nep-gth, nep-mic and nep-ore
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