The emergence of networks in the presence of homophilous and heterophilous preferences

Abstract

Human beings make links with similar and dissimilar people based on certain atributes. In this thesis, I propose a network formation model where agents have a dichotomic attribute, they have preferences for similar and dissimilar individuals, and there is also a linking cost. Three different networks are characterized using the concept of pairwise stability. As a result, agents link with similar or dissimilar individuals if and only if their preferences reflect this behavior. Finally, a discussion about the limitations and future research of this model is made.