Segregation and Strategic Neighborhood Interaction

We introduce social interactions into the Schelling model of residential choice; these interactions take the form of a Prisoner's Dilemma game. We first study a Schelling model and a spatial Prisoner's Dilemma model separately to provide benchmarks for studying a combined model, with preferences over like-typed neighbors and payoffs in the spatial Prisoner's Dilemma game. We find that the presence of these additional social interactions may increase or decrease segregation compared to the standard Schelling model. If the social interactions result in cooperation then segregation is reduced, otherwise it can be increased.