Abstract
We develop a dynamic model of opinion formation in social networks when the information required for learning a parameter may not be at the disposal of any single agent. Individuals engage in communication with their neighbors in order to learn from their experiences. However, instead of incorporating the views of their neighbors in a fully Bayesian manner, agents use a simple updating rule which linearly combines their personal experience and the views of their neighbors. We show that, as long as individuals take their personal signals into account in a Bayesian way, repeated interactions lead them to successfully aggregate information and learn the true parameter. This result holds in spite of the apparent naïveté of agents' updating rule, the agents' need for information from sources the existence of which they may not be aware of, worst prior views, and the assumption that no agent can tell whether her own views or those of her neighbors are more accurate.
Original language | English (US) |
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Pages (from-to) | 210-225 |
Number of pages | 16 |
Journal | Games and Economic Behavior |
Volume | 76 |
Issue number | 1 |
DOIs | |
State | Published - Sep 1 2012 |
Keywords
- Information aggregation
- Learning
- Social networks
ASJC Scopus subject areas
- Finance
- Economics and Econometrics