  Is homophily in social and economic networks driven by a taste for
homogeneity (preferences) or by a higher probability of meeting individuals
with similar attributes (opportunity)? This paper studies identification and
estimation of an iterative network game that distinguishes between these two
mechanisms. Our approach enables us to assess the counterfactual effects of
changing the meeting protocol between agents. As an application, we study the
role of preferences and meetings in shaping classroom friendship networks in
Brazil. In a network structure in which homophily due to preferences is
stronger than homophily due to meeting opportunities, tracking students may
improve welfare. Still, the relative benefit of this policy diminishes over the
school year.
