Heterogeneity and Networks

This chapter shows that networks can have large and differentiated effects on behavior and then argues that social and economic pressures facilitate the formation of heterogenous networks. Thus networks can play an important role in understanding the diversity of human behavior and economic outcomes that are empirically observed. ∗Faculty of Economics and Christ’s College, University of Cambridge. Email: [email protected] This is an invited chapter for Volume 4 of the Handbook on Heterogeneous Agent Models, edited by Cars Hommes and Blake LeBaron. I thank Gustavo Paez for expert research assistance.