Social Interactions and Endogenous Association - Department of ...

Figure 1. Sorting on Characteristics.
A. Active Associations B. (Weighted) Mean Characteristics of
Associates
A
π
H|H
A
x H
C. High-Low Difference in (Weighted)
Mean Characteristics of Associates
A
H
x − x
A
L
π
H
A Max
x
∂U
∂π
A
H | H
= 0
x H
∂U
∂π
A
H | H
= 0
1
π
H
1
π H
High
Reg 1
High
Reg 2
1
High
Reg 3
π H
Reg 1 Reg 2 Reg 3
x L
Reg 1 Reg 2 Reg 3
Low
Reg 3
Low
Reg 2
Low
Reg 1