Fashion and Homophily

Operations Research, Forthcoming

41 Pages Posted: 16 Apr 2013 Last revised: 7 Feb 2018

See all articles by Boyu Zhang

Boyu Zhang

Beijing Normal University (BNU)

Zhigang Cao

Beijing Jiaotong University - School of Economics and Management

Cheng-Zhong Qin

University of California, Santa Barbara (UCSB) - Department of Economics

Xiaoguang Yang

Chinese Academy of Sciences (CAS)

Date Written: April 14, 2013

Abstract

We analyze the evolution of fashion based on a network game model. Each agent in this model is either a conformist or a rebel. A conformist prefers to take the action most common among her neighboring agents, whereas a rebel prefers the opposite. When there is only one type of agent, the model possesses an exact potential function, implying that fashion cycles are unlikely to emerge in a homogeneous population. The homophily index, a measure of segregation in networks with multiple types of nodes, is shown to play a key role in the emergence of fashion cycles. Our main finding is that a lower homophily index, in general, promotes the emergence of fashion cycles. We establish this result through a potential analysis, a partial potential analysis, and a stability analysis of a system of ordinary differential equations that is approximated from a stochastic best response dynamic. Numerical simulations based on a variety of networks confirm that the approximate analysis is reliable.

Keywords: network games, homophily, fashion cycle, Matching Pennies, partial potential analysis

JEL Classification: A14, C62, C72, D72, D83, D85, Z13

Suggested Citation

Zhang, Boyu and Cao, Zhigang and Qin, Cheng-Zhong and Yang, Xiaoguang, Fashion and Homophily (April 14, 2013). Operations Research, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2250898 or http://dx.doi.org/10.2139/ssrn.2250898

Boyu Zhang

Beijing Normal University (BNU) ( email )

19 Xinjiekou Outer St
Haidian District
Beijing, Guangdong 100875
China

Zhigang Cao (Contact Author)

Beijing Jiaotong University - School of Economics and Management ( email )

China

Cheng-Zhong Qin

University of California, Santa Barbara (UCSB) - Department of Economics ( email )

2127 North Hall
Santa Barbara, CA 93106
United States

Xiaoguang Yang

Chinese Academy of Sciences (CAS) ( email )

52 Sanlihe Rd.
Datun Road, Anwai
Beijing, Xicheng District 100864
China

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