Segregation in Friendship Networks

Abstract

We analyze a network formation model where agents belong to different communities. Both individual benefits and costs depend on direct as well as indirect connections. Benefits of an indirect connection decrease with distance in the network while the cost of a link depends on the type of agents involved. Two individuals from the same community always face a low linking cost while the cost of forming a relationship between two individuals from different communities diminishes with the rate of exposure of each of them to the other community. We find that socialization among the same type of agents can be weak even if the cost of maintaining links within one's own type is very low. Our model also suggests that policies aiming at reducing segregation are socially desirable only if they reduce the within-community cost differential by a sufficiently large amount.

Assortative matching with network spillovers

“…The essential difference between how we model complementarity here and how de Martí and Zenou (2017) model it also implies that we interpret our results differently. First, our results are relevant in cases when we do not expect endogenous complementarity (see example above).…”

“…The results in deMartí and Zenou (2017) do not rule out that there can exist stable networks (e.g. some amount of connectivity between groups) that are more efficient than a sorted network.…”

“…The essential difference is that we use exogenous complementarity which is independent of the network, while de Martí and Zenou (2017) use endogenous complementarity. de Martí and Zenou (2017) specifically assume that complementarity is strongest when the level of sorting is high, while there is no complementarity when there is negative sorting (i.e.…”

“…7 See Propositions 1.ii, 4.iii in de Martí and Zenou (2017) for results on stable sorting; their Proposition 6 contains results on inefficiency.…”

The Impact of Social Segregation on the Labor Market Outcomes of Low‐Skilled Workers*

“…In the game-theoretic literature, Martí and Zenou (2017) study network formation and segregation between communities, assuming that the link formation cost within communities is different from the link formation cost across communities. Their results suggest that an integrated society might not provide a larger welfare than a segregated society when policies aiming to reduce inter-community socialization costs are introduced.…”