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In this paper we address how complex social communities emerge from localdecisions by individuals with limited attention and knowledge. This problem iscritical; if we understand community formation mechanisms, it may be possibleto intervene to improve social welfare. We propose an interpretable, novelmodel for attributed community formation driven by resource-boundedindividuals' strategic, selfish behavior. In our stylized model, attributedindividuals act strategically in two dimensions: attribute and networkstructure. Agents are endowed with limited attention, and communication costslimit the number of active connections. In each time step, each agent proposesa new friendship. Agents then accept proposals, decline proposals, or removefriends, consistent with their strategy to maximize payoff. We identifycriteria (number of stable triads) for convergence to some community structureand prove that our community formation model converges to a stable network.Ablations justify the ecological validity of our model and show that eachaspect of the model is essential. Our empirical results on a physical worldmicrofinance community demonstrate excellent model fits compared to baselinemodels.

Friends with Costs and Benefits: Community Formation with Myopic, Boundedly-Rational Actors