Acquiring Information through Peers

We develop an endogenous network formation model, in which agents form connections to acquire information. Our model features complementarity in actions as agents care not only about accuracy of their decision-making but also about the actions of other agents. In equilibrium, the information structure is a hierarchical network, and, under weakly convex cost of forming links, the equilibrium network is core-periphery. Although agents are ex ante identical, there is ex post heterogeneity in payoffs and actions. (JEL D83, D85, Z13)

Assortative matching with network spillovers

This paper investigates endogenous network formation by heterogeneous agents. The agents' types determine the value of linking and we incorporate spillovers as utility from indirect connections. We provide sufficient conditions for a class of networks with sorting to be stable for low to moderate spillovers; with only two types these networks are the unique pairwise stable ones. We also show that this sorting is suboptimal for moderate to high spillovers despite otherwise obeying the conditions for sorting in Becker 1973. This shows that in our sorted networks a tension between stability and efficiency is present. We analyze a policy tool to mitigate suboptimal sorting.