Stability and segregation in group formation

Igal Milchtaich*, Eyal Winter

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

28 Scopus citations


This paper presents a model of group formation based on the assumption that individuals prefer to associate with people similar to them. It is shown that, in general, if the number of groups that can be formed is bounded, then a stable partition of the society into groups may not exist. (A partition is defined as stable if none of the individuals would prefer be in a different group than the one he is in.) However, if individuals' characteristics are one-dimensional, then a stable partition always exists. We give sufficient conditions for stable partitions to be segregating (in the sense that, for example, low-characteristic individuals are in one group and high-characteristic ones are in another) and Pareto efficient. In addition, we propose a dynamic model of individual myopic behavior describing the evolution of group formation to an eventual stable, segregating, and Pareto efficient partition. Journal of Economic Literature Classification Numbers: C72, H41.

Original languageAmerican English
Pages (from-to)318-346
Number of pages29
JournalGames and Economic Behavior
Issue number2
StatePublished - 2002

Bibliographical note

Funding Information:
1The second author thanks the German—Israeli Foundation and the European Commission for financial support through the GIF and TMR grants.


  • Coalition structure
  • Group formation
  • Local public goods
  • Myopic optimization
  • Segregation
  • Weak acyclicity


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