A Belief-Based Theory of Homophily

41 Pages Posted: 19 Nov 2016  

Willemien Kets

Northwestern University; Tilburg University - CentER for Economic Research

Alvaro Sandroni

University of Pennsylvania - The Ronald O. Perelman Center for Political Science and Economics (PCPSE); Northwestern University - Kellogg School of Management

Date Written: September 29, 2016

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 into the shoes of a member of their own group. Endogenizing the drivers of homophily permits us to derive novel comparative statics results and to explain commonly observed features of social and economic networks.

Keywords: social and economic networks, homophily, segregation, Theory of Mind

JEL Classification: C70, C72, D01, D03, D83, D85

Suggested Citation

Kets, Willemien and Sandroni, Alvaro, A Belief-Based Theory of Homophily (September 29, 2016). Available at SSRN: https://ssrn.com/abstract=2871514 or http://dx.doi.org/10.2139/ssrn.2871514

Willemien Kets (Contact Author)

Northwestern University ( email )

2001 Sheridan Road
Evanston, IL 60208
United States

Tilburg University - CentER for Economic Research ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Alvaro Sandroni

University of Pennsylvania - The Ronald O. Perelman Center for Political Science and Economics (PCPSE) ( email )

133 South 36th Street
Philadelphia, PA 19104-6297
United States

Northwestern University - Kellogg School of Management ( email )

2001 Sheridan Road
Evanston, IL 60208
United States
847-491-5461 (Phone)
847-467-1220 (Fax)

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