Chapter 12 Heterogeneity and Networks ✶ ✶ I thank Gustavo Paez for expert research assistance and am grateful to Joerg Kalbfuss, Alan Walsh, and two referees for helpful comments. I thank Cars Hommes for editorial guidance and for suggestions on an earlier draft.

Abstract

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 heterogeneous networks. Thus networks can play an important role in understanding the wide diversity in human behavior and in economic outcomes.