MUTUAL ADMIRATION CLUBS

Authors

  • WING SUEN

    1. Suen: Henry G. Leong Professor in Economics, School of Economics and Finance, University of Hong Kong, Pokfulam, Hong Kong. Phone (852) 25481152, Fax (852) 25481152, E-mail wsuen@econ.hku.hk
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    • *

      This work grew out of conversations with Jimmy Chan and Dan Usher. Ronald Chan, Priscilla Man, and Kwan To Wong provided able research assistance. Valuable comments from Parimal Bag and Li Hao are gratefully acknowledged. I thank Alan Siu in particular for suggesting the title of this article.


Abstract

This article proposes a theory of group formation based on the motive to seek informed opinion. Because an individual evaluates whether others are informed or not using his own priors, he identifies people with similar beliefs to be more informed than those with different beliefs. The result is an equilibrium in which like-minded individuals self-select into distinct groups, with members of each group believing that their own group is superior. (JEL D71, D81, D83, D85)

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