How Homophily Affects the Speed of Learning and Best-Response Dynamics

We examine how the speed of learning and best-response processes depends on homophily: the tendency of agents to associate disproportionately with those having similar traits. When agents' beliefs or behaviors are developed by averaging what they see among their neighbors, then convergence to a consensus is slowed by the presence of homophily but is not influenced by network density (in contrast to other network processes that depend on shortest paths). In deriving these results, we propose a new, general measure of homophily based on the relative frequencies of interactions among different groups. An application to communication in a society before a vote shows how the time it takes for the vote to correctly aggregate information depends on the homophily and the initial information distribution. JEL Codes: D83, D85, I21, J15, Z13 Copyright 2012, Oxford University Press.