A belief-based theory of homophily

Abstract

We introduce a model of homophily that does not rely on the assumption of homophilous preferences. Rather, it builds on the dual process account of Theory of Mind in psychology which focuses on the role of introspection in decision making. Homophily emerges because players find it easier to put themselves in each other's shoes when they share a similar background. The model delivers novel comparative statics that emphasize the interplay of cultural and economic factors. Whether homophily is socially optimal depends crucially on the degree of economic stability.

Voting and Social Pressure Under Imperfect Information

“…This adds to the work of Kets and Sandroni (), who show that homophily can arise despite the lack of a direct preference for similar friends as a way to reduce uncertainty when matched agents must play a coordination game.…”

Accounting for Heterogeneity in Network Formation Behaviour: An Application to Vietnamese SMEs

“…Homophily is predominantly observed in many types of social networks of agents, such as individuals, households, and firms (McPherson et al, 2001). Homophilous preference arises because, for example, agents face less uncertainty when interacting with those with similar backgrounds (Kets and Sandroni, 2019). This can be further amplified by the diffusion of preferences within the group (Kandel, 1978;Kossinets and Watts, 2009) and opportunities to meet similar agents (Currarini et al, 2009(Currarini et al, , 2016.…”

“…the tendency of agents to connect with others who are socially and economically similar or geographically close, is a major driving force of social network formation (e.g. McPherson, Smith-Lovin and Cook, 2001;Fafchamps and Gubert, 2007;Currarini, Jackson and Pin, 2009;Baccara and Yariv, 2013;Currarini, Matheson and Vega-Redondo, 2016;Kets and Sandroni, 2019).…”

The Last will be First, and the First Last: Segregation in Societies with Relative Payoff Concerns (RM/18/027-revised-)

“…Notable contributions to the study of segregation and stability in group formation are Milchtaich and Winter (2002), Pȩski and Szentes (2013), Goyal, Hernández, Martínez-Cánovas, Moisan, Muñoz-Herrera, and Sánchez (2018), and Kets and Sandroni (2019). Milchtaich and Winter (2002) present a model of group formation based on the assumption that individuals prefer to associate with people similar to them.…”

“…Preferences for similar agents are implicit in Goyal, Hernández, Martínez-Cánovas, Moisan, Muñoz-Herrera, and Sánchez (2018), who show both theoretically and experimentally how segregation can arise in coordination games when agents, belonging to one of two types, can choose with whom to interact. Kets and Sandroni (2019) endogenize agents' preferences for interacting with their own group by modeling the process by which agents take others' perspective. In our approach, segregation arises without the assumption that individuals have homophilous preferences.…”