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We develop a model of friendship formation that sheds light on segregation patterns observed in social and economic networks. Individuals have types and see type-dependent benefits from friendships. We examine the properties of a steady-state equilibrium of a matching process of friendship formation. We use the model to understand three empirical patterns(More)
We consider any network environment in which the " best shot game " is played. This is the case where the possible actions are only two for every node (0 and 1), and the best response for a node is 1 if and only if all her neighbors play 0. A natural application of the model is one in which the action 1 is the purchase of a good, which is locally a public(More)
The best shot game applied to networks is a discrete model of many processes of contribution to local public goods. It generally has a wide multiplicity of equilibria that we refine through stochastic stability. We show that, depending on how we define perturbations – i.e., possible mistakes that agents make – we can obtain very different sets of(More)
Homophily, the tendency of people to associate with others similar to themselves, is observed in many social networks, ranging from friendships to marriages to business relationships, and is based on a variety of characteristics, including race, age, gender, religion, and education. We present a technique for distinguishing two primary sources of homophily:(More)
Networks describe a variety of interacting complex systems in social science, biology, and information technology. Usually the nodes of real networks are identified not only by their connections but also by some other characteristics. Examples of characteristics of nodes can be age, gender, or nationality of a person in a social network, the abundance of(More)
We model network formation when heterogeneous nodes enter sequentially and form connections through both random meetings and network-based search, but with type-dependent biases. We show that there is " long-run integration, " whereby the composition of types in sufficiently old nodes' neighborhoods approaches the global type distribution, provided that the(More)
The very notion of social network implies that linked individuals interact repeatedly with each other. This notion allows them not only to learn successful strategies and adapt to them, but also to condition their own behavior on the behavior of others, in a strategic forward looking manner. Game theory of repeated games shows that these circumstances are(More)
We propose a model of price competition where consumers exogenously differ in the number of prices they compare. Our model can be interpreted either as a non–sequential search model or as a network model of price competition. We show that i) if consumers who previously just sampled one firm start to compare more prices all types of consumers will expect to(More)