Group Identity in a Network Formation Game with Cost Sharing, Accepted Journal of Public Economic Theory (working paper version)

(An earlier version co-authored with with Jurjen J. A. Kamphorst was called "Choosing `Me' and `My Friends': Identity in a Non-Cooperative Network Formation Game with Cost Sharing")

This paper introduces the choice of group identity, which comprises of characteristics and commitments to these characteristics, in a network formation model where links costs are shared. Players want to link to the largest group given that linking costs for players of the same (different) characteristic are decreasing (increasing) in their commitments. The equilibrium concepts used are Nash equilibrium as well as one that looks for stability allowing for bilateral negotiations. Conditions are shown under which the endogenous choice of characteristics and commitments allow for multiple groups with segregated or connected networks. When group identity is partly endogenous, such that characteristics are .fixed and players only choose commitment, it is shown that the equilibrium population commitment pro.file dictates whether the resulting network is segregated or connected. When group identity is fully endogenous, it is shown that multiple groups and segregated networks are possible equilibrium outcomes but such outcomes are not stable unless the group size additionally affects the costs of link formation.

Networks of Information Exchange: Are Link Formation Decisions Strategic?, Economics Letters                                  

This paper presents an empirical investigation into whether the decision to form a link with a node takes into account how well connected that node is. Given data in the form of a random sample from a network, this paper proposes a novel way to measure the degree of a node to adjust for mismeasurement and also controls for the endogeneity of this variable. It is shown that in fact the probability of forming a link with a node is increasing in the links received by that node but decreasing or unaffected by the links made by that node.

Ethnic Inequality: Theory and Evidence from Formal Education in Nigeria, with Blessing U. Mberu and Roland Pongou, Economic Development and Cultural Change (working paper version)                            

We study the causes of inequality in human capital accumulation across ethnic and religious groups. A model in which agents decide how much time to invest in human capital versus ethnic capital shows that the demand for human capital is affected positively by parental and group's older cohort human capital, and negatively by group size. Two identical groups may diverge in human capital accumulation, with the difference mostly occurring among their low-ability members. Furthermore, group and ethnic fragmentation increases the demand for human capital. We validate these predictions using household data from Nigeria where ethnicity and religion are the primary identity cleavages. We document persistent ethnic and religious inequality in educational attainment. Members of ethnic groups that historically converted to Christianity outperform those whose ancestors converted to Islam. Consistent with theory, there is little difference between the high-ability members of these groups, but low-ability members of historically Muslim groups choose Koranic education as an alternative to formal education, even when formal education is free. Moreover, more religiously fragmented ethnic groups fare better, and local ethnic diversity increases the demand for formal education. Our analysis sheds light on the political context that underlines the recent violent opposition to "western education" in the country.

Homophily and Community Structure in Networks, Journal of Public Economic Theory (working paper version)                                      

This paper proposes a strategy to estimate the community structure for a network accounting for empirically established fact that communities and links are formed based on homophily. It presents a maximum likelihood approach to rank the community structures where the set of possible community structures depends on the set of salient characteristics and the probability of a link between the nodes varies according to the characteristics of the two nodes. This approach has good large sample properties which lead to a practical algorithm for estimation. To exemplify the approach it is applied to data collected from four village clusters in Ghana.

Identity and Fragmentation in Networks, Mathematical Social Sciences, Volume 71, September 2014 (working paper version)             

This paper examines the role of identity in the fragmentation of networks by incorporating the choice of commitment to identity characteristics into a non-cooperative network formation game. The Nash network features divisions based on identity, with layers within these divisions.Using the refinement of strictness I find structures where stars of highly committed players are linked together by less committed players.

Transfer of information by an informed trader, Finance Research Letters, Volume 10, Issue 2, June 2013

This paper analyzes the effect of the transfer of information by an informed strategic trader (owner) to another strategic player (buyer). It shows that while the owner will never fully divulge his information, he may transfer a noisy signal of his information to the buyer. With such a transfer, the owner loses some of his informational superiority and yet increases his trading profit. I also show that if the transfer can be made to more than one buyer, then, the owner’s profit is increasing in the number of other buyers to whom the transfer is made.