1. Michael E. Sobel is Professor, Columbia University, New York, NY 10027 . The author thanks Xavier de Souza Briggs, Steven Durlauf, Elizabeth Halloran, Jennifer Hill, Booil Jo, several anonymous reviewers, and the members of the McArthur Network on Inequality and Social Interactions, to whom this work was first presented in 2002, for helpful comments and advice, and the John D. and Catherine T. MacArthur Foundation for financial support.