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Stability and Segregation in Group Formation

Author

Listed:
  • Igal Milchtaich
  • Eyal Winter

Abstract

This paper presents a model of group formation based on the assumption that individuals prefer to associate with people similar to them. It is shown that, in general, if the number of groups that can be formed is bounded, then a stable partition of the society into groups may not exist. A partition is defined as stable if none of the individuals would prefer be in a different group than the one he is in. However, if individuals’ characteristics are one-dimensional, then a stable partition always exists. We give sufficient conditions for stable partitions to be segregating (in the sense that, for example, low-characteristic individuals are in one group and high-characteristic ones are in another) and Pareto efficient. In addition, we propose a dynamic model of individual myopic behavior describing the evolution of group formation to an eventual stable, segregating, and Pareto efficient partition.

Suggested Citation

  • Igal Milchtaich & Eyal Winter, 2000. "Stability and Segregation in Group Formation," Discussion Paper Series dp263, The Federmann Center for the Study of Rationality, the Hebrew University, Jerusalem.
    • Handle: RePEc:huj:dispap:dp263
    as

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    References listed on IDEAS

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    More about this item

    Keywords

    group formation; coalition structure; local public goods; segregation; myopic optimization; weak acyclicity;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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