  Measuring the effect of peers on individuals' outcomes is a challenging
problem, in part because individuals often select peers who are similar in both
observable and unobservable ways. Group formation experiments avoid this
problem by randomly assigning individuals to groups and observing their
responses; for example, do first-year students have better grades when they are
randomly assigned roommates who have stronger academic backgrounds? In this
paper, we propose randomization-based permutation tests for group formation
experiments, extending classical Fisher Randomization Tests to this setting.
The proposed tests are justified by the randomization itself, require
relatively few assumptions, and are exact in finite-samples. This approach can
also complement existing strategies, such as linear-in-means models, by using a
regression coefficient as the test statistic. We apply the proposed tests to
two recent group formation experiments.
