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On the Origin of Polarization

Author

Listed:
  • John Duffy

    (Department of Economics, University of California, Irvine, California, 92697)

  • Seung Han Yoo

    (Department of Economics, Korea University, 145 Anam-ro, Seongbuk-gu, Seoul, Republic of Korea, 02841)

Abstract

We provide a dynamic, spatial model of group sorting and polarization based on observable group identity alone. Agents, who belong to one of two perfectly observable groups, are randomly matched to play an investment game in youth and old age, and make a location decision in between. Each agent’s ability is private information and the true distribution of each group’s of abilities (types) is uncertain, so agents have to form beliefs about these distributions in making both investment and location decisions. Further, agents have no preferences or special facilities for interacting with members of their own group. We characterize the equilibrium for this endogenous, dynamic spatial location model which involves the formation of higher order perceptions and we show that under certain conditions, a limiting outcome of the dynamical system is that the society becomes completely polarized with members of each group rationally choosing to congregate in distinct locations.

Suggested Citation

  • John Duffy & Seung Han Yoo, 2022. "On the Origin of Polarization," Discussion Paper Series 2202, Institute of Economic Research, Korea University.
    • Handle: RePEc:iek:wpaper:2202
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    File URL: http://econ.korea.ac.kr/~ri/WorkingPapers/w2202.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Polarization; group bias; homophily; private monitoring; sorting; Bayesian learning.;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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