We propose a random network model incorporating heterogeneity of agents and a continuous notion of homophily. Unlike … the vast majority of the corresponding economic literature, we capture homophily in terms of similarity rather than … characteristics. A homophily parameter directly determines the strength of this effect. As a main result, we show that for any …

that amount. The information that the nodes receive through the network is the revenue from investments in links. We prove … maximizing the aggregate profit, are still the all-encompassing star and the complete network, with the sole and rare exception … of a highly particular case where there is a draw between the allencompassing star, the complete network and a whole …

partition the network into smaller subgames whose equilibrium sets may be more feasible to compute. We provide bounds on the … interactions. We also provide algorithms for computing pairwise stable and directed Nash stable networks in network formation games. …

heterogeneity) as well as homophily/heterophily across the K types of agents. In contrast, the network benefit function allows agents …Consider a setting where N players, partitioned into K observable types, form a directed network. Agents' preferences … over the form of the network consist of an arbitrary network benefit function (e.g., agents may have preferences over their …

We introduce a test for whether agents' preferences over network structure are interdependent. Interdependent … directed by other agents. Our model also incorporates agent-specific in- and out-degree heterogeneity and homophily on … observable agent attributes. This introduces 2N + K2 nuisance parameters (N is number of agents in the network and K the number …

characteristics (homophily) as well as unrestricted agent level heterogeneity in link surplus (degree heterogeneity). Like in fixed … unrestricted. Two estimators for the (common) homophily parameter, ß0 , are developed and their properties studied under an … asymptotic sequence involving a single network growing large. The first, tetrad logit (TL), estimator conditions on a sufficient …