Making friends: The role of assortative interests and capacity constraints

• Assortative interests and capacity constraints shape stable friendship networks. For intermediate assortativity extremely partially homophilic patterns co- exist. Due to relations also feature heterophily. There is a conflict between welfare maximizing We study networks under the assumption that people are constrained build qualities of their relations. investigate connection (exogenous) assortative (endogenous) patterns, its implications. Under simple link formation technology, bolster an interesting mechanism leads asymmetric investments in links and, furthermore, makes relatively good-quality heterophilic necessary for extreme forms be stable. interests, either (or heterophilic) may coexist with more moderate forms. present empirical evidence on identified features patterns. Efficiency requires common aggregate across all agents within each different population group. Although efficiency needs not follow general, we identify particular efficient. Additionally, class levels homophily, which stability compatible. Such constructions provide insightful guidance role sizes facilitate