Dispersed Behavior and Perceptions in Assortative Societies
American Economic Review
vol. 112,
no. 9, September 2022
(pp. 3063-3105)
Abstract
We formulate a model of social interactions and misinferences by agents who neglect assortativity in their society, mistakenly believing that they interact with a representative sample of the population. A key component of our approach is the interplay between this bias and agents' strategic incentives. We highlight a mechanism through which assortativity neglect, combined with strategic complementarities in agents' behavior, drives up action dispersion in society (e.g., socioeconomic disparities in education investment). We also suggest that the combination of assortativity neglect and strategic incentives may be relevant in understanding empirically documented misperceptions of income inequality and political attitude polarization.Citation
Frick, Mira, Ryota Iijima, and Yuhta Ishii. 2022. "Dispersed Behavior and Perceptions in Assortative Societies." American Economic Review, 112 (9): 3063-3105. DOI: 10.1257/aer.20190486Additional Materials
JEL Classification
- C78 Bargaining Theory; Matching Theory
- D11 Consumer Economics: Theory
- D31 Personal Income, Wealth, and Their Distributions
- D72 Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
- D82 Asymmetric and Private Information; Mechanism Design
- D91 Micro-Based Behavioral Economics: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making