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Choosing peers: Homophily and polarization in groups

Baccara, Mariagiovanna and Yariv, Leeat (2016) Choosing peers: Homophily and polarization in groups. Journal of Economic Theory, 165 . pp. 152-178. ISSN 0022-0531. doi:10.1016/j.jet.2016.04.005.

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This paper studies the formation of peer groups entailing the joint production of public goods. In our model agents choose their peers and have to pay a connection cost for each member added to the group. After groups are formed, each agent selects a public project to make a costly contribution to, and all members of the group experience the benefits of these contributions. Since agents differ in how much they value one project relative to the other, the group's preferences affect the generated profile of public goods. We characterize mutually optimal groups, groups that are optimal for all their members. When contribution costs are low relative to connection costs, mutually optimal groups must be sufficiently homogeneous. As contribution costs increase relative to connection costs, agents desire more connections, which in turn raises the risk of free riding. Extreme peers are then more appealing, since they are more willing to contribute, and polarization arises.

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Additional Information:© 2016 Elsevier Inc. Received 13 November 2013; final version received 29 March 2016; accepted 9 April 2016. Available online14 April 2016.
Subject Keywords:Homophily; Peer groups; Mutually optimal groups; Public goods; Tiebout
Classification Code:JEL classification: D82; D85
Record Number:CaltechAUTHORS:20161006-103442942
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Official Citation:Mariagiovanna Baccara, Leeat Yariv, Choosing peers: Homophily and polarization in groups, Journal of Economic Theory, Volume 165, September 2016, Pages 152-178, ISSN 0022-0531, (
Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:70913
Deposited By: Ruth Sustaita
Deposited On:12 Oct 2016 23:02
Last Modified:11 Nov 2021 04:37

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