Abstract:
Social networks play an important role in human interaction. It is possible
for social differentiation and segregation to discourage links that are
desirable from an efficiency point of view, or for social matches to
encourage them. This study looks at how individual behavior and the
diffusion of demographic information affects social interactions. Based on
a controlled lab experiment, we assess three key determinants of social
interaction: (i) homophily, (ii) preference for fairness and (iii) past
behavior. Of the experiment’s three treatment groups – an out-group and
two variations of in-group pairings – we find that participants show less
homophily toward an in-group match when they know their partner
cannot influence their outcome. However, if there is a chance of the
behavior being reprimanded, the opposite is true. Finally, we present
strong evidence in favor of reciprocity and coordination because
participants are responsive to their partner’s decision in prior interactions.
