Emergence of Homophily under Contextual Mechanisms
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arXiv
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| Format: | Preprint |
| Published: |
2025
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| _version_ | 1866918158569308160 |
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| author | Weng, Jiaxing Yang, Haijun Wang, Tongyu |
| author_facet | Weng, Jiaxing Yang, Haijun Wang, Tongyu |
| contents | This paper introduces a tractable model to study incentive-compatible homophily under both external environments--such as exogenous shocks or policy constraints--and internal micromotives based on interactive attributes. We propose a set of invariants that capture main features of homophily and the well-defined partition dynamics leading to perfect global homophily. The criteria for homophily formation are characterized via isomorphism. Within this framework, we demonstrate the emergence of macro-complementarity coupled with micro-substitution, where local individuals' utility function is nonlinear and submodular. We discuss two types of financial networks and their differences: hierarchical structure emerges from short-term liquidity transactions, whereas core-periphery structure is based on a stock-based perspective. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2510_09821 |
| institution | arXiv |
| publishDate | 2025 |
| record_format | arxiv |
| spellingShingle | Emergence of Homophily under Contextual Mechanisms Weng, Jiaxing Yang, Haijun Wang, Tongyu Theoretical Economics This paper introduces a tractable model to study incentive-compatible homophily under both external environments--such as exogenous shocks or policy constraints--and internal micromotives based on interactive attributes. We propose a set of invariants that capture main features of homophily and the well-defined partition dynamics leading to perfect global homophily. The criteria for homophily formation are characterized via isomorphism. Within this framework, we demonstrate the emergence of macro-complementarity coupled with micro-substitution, where local individuals' utility function is nonlinear and submodular. We discuss two types of financial networks and their differences: hierarchical structure emerges from short-term liquidity transactions, whereas core-periphery structure is based on a stock-based perspective. |
| title | Emergence of Homophily under Contextual Mechanisms |
| topic | Theoretical Economics |
| url | https://arxiv.org/abs/2510.09821 |