×

Network structure and naive sequential learning. (English) Zbl 1466.91225

Summary: We study a sequential-learning model featuring a network of naive agents with Gaussian information structures. Agents apply a heuristic rule to aggregate predecessors’ actions. They weigh these actions according the strengths of their social connections to different predecessors. We show this rule arises endogenously when agents wrongly believe others act solely on private information and thus neglect redundancies among observations. We provide a simple linear formula expressing agents’ actions in terms of network paths and use this formula to characterize the set of networks where naive agents eventually learn correctly. This characterization implies that, on all networks where later agents observe more than one neighbor, there exist disproportionately influential early agents who can cause herding on incorrect actions. Going beyond existing social-learning results, we compute the probability of such mislearning exactly. This allows us to compare likelihoods of incorrect herding, and hence expected welfare losses, across network structures. The probability of mislearning increases when link densities are higher and when networks are more integrated. In partially segregated networks, divergent early signals can lead to persistent disagreement between groups.

MSC:

91D15 Social learning
91D30 Social networks; opinion dynamics

References:

[1] Acemoglu, Daron, VictorChernozhukov, and MuhametYildiz (2016), “Fragility of asymptotic agreement under Bayesian learning.” Theoretical Economics, 11, 187-225. · Zbl 1395.91094
[2] Acemoglu, Daron, GiacomoComo, FabioFagnani, and AsumanOzdaglar (2013), “Opinion fluctuations and disagreement in social networks.” Mathematics of Operations Research, 38, 1-27. · Zbl 1297.91130
[3] Acemoglu, Daron, Munther A.Dahleh, IlanLobel, and AsumanOzdaglar (2011), “Bayesian learning in social networks.” Review of Economic Studies, 78, 1201-1236. · Zbl 1274.91354
[4] Acemoglu, Daron, AsumanOzdaglar, and AliParandehGheibi (2010), “Spread of (mis) information in social networks.” Games and Economic Behavior, 70, 194-227. · Zbl 1202.91284
[5] Bala, Venkatesh and SanjeevGoyal (1998), “Learning from neighbours.” Review of Economic Studies, 65, 595-621. · Zbl 0910.90103
[6] Banerjee, Abhijit V. (1992), “A simple model of herd behavior.” Quarterly Journal of Economics, 107, 797-817.
[7] Bikhchandani, Sushil, DavidHirshleifer, and IvoWelch (1992), “A theory of fads, fashion, custom, and cultural change as informational cascades.” Journal of Political Economy, 100, 992-1026.
[8] Bohren, J. Aislinn (2016), “Informational herding with model misspecification.” Journal of Economic Theory, 163, 222-247. · Zbl 1369.91156
[9] Bohren, J. Aislinn and DanielHauser (2018), “Bounded rationality and learning: A framework and a robustness result.” Unpublished paper, SSRN 3236842.
[10] Chandrasekhar, Arun G., HoracioLarreguy, and Juan PabloXandri (2020), “Testing models of social learning on networks: Evidence from two experiments.” Econometrica, 88, 1-32. · Zbl 1466.91224
[11] Coleman, James (1958), “Relational analysis: The study of social organizations with survey methods.” Human Organization, 17, 28-36.
[12] Dasaratha, Krishna and KevinHe (2019), “An experiment on network density and sequential learning.” Unpublished paper. Available at arXiv:1909.02220.
[13] DeMarzo, Peter M., DimitriVayanos, and JeffreyZwiebel (2003), “Persuasion bias, social influence, and uni‐dimensional opinions.” Quarterly Journal of Economics, 118, 909-968. · Zbl 1069.91093
[14] Enke, Benjamin and FlorianZimmermann (2017), “Correlation neglect in belief formation.” Review of Economic Studies, 86, 313-332. · Zbl 1409.91088
[15] Eyster, Erik and MatthewRabin (2010), “Naive herding in rich‐information settings.” American Economic Journal: Microeconomics, 2, 221-243.
[16] Eyster, Erik and MatthewRabin (2014), “Extensive imitation is irrational and harmful.” Quarterly Journal of Economics, 129, 1861-1898. · Zbl 1400.91133
[17] Eyster, Erik, MatthewRabin, and GeorgWeizsacker (2015), “An experiment on social mislearning.” Unpublished paper, SSRN 2704746.
[18] Golub, Benjamin and Matthew O.Jackson (2010), “Naive learning in social networks and the wisdom of crowds.” American Economic Journal: Microeconomics, 2, 112-149.
[19] Golub, Benjamin and Matthew O.Jackson (2012), “How homophily affects the speed of learning and best‐response dynamics.” Quarterly Journal of Economics, 127, 1287-1338. · Zbl 1400.91465
[20] Hązła, Jan, AliJadbabaie, ElchananMossel, and M. AminRahimian (forthcoming), “Bayesian decision making in groups is hard.” Operations Research. Available at arXiv:1705.04770.
[21] Lee, In Ho (1993), “On the convergence of informational cascades.” Journal of Economic Theory, 61, 395-411. · Zbl 0796.90012
[22] Levy, Gilat and RonnyRazin (2018), “Information diffusion in networks with the Bayesian peer influence heuristic.” Games and Economic Behavior, 109, 262-270. · Zbl 1390.91269
[23] Lobel, Ilan and EvanSadler (2015), “Information diffusion in networks through social learning.” Theoretical Economics, 10, 807-851. · Zbl 1395.91375
[24] McPherson, Miller, LynnSmith‐Lovin, and James M.Cook (2001), “Birds of a feather: Homophily in social networks.” Annual Review of Sociology, 27, 415-444.
[25] Molavi, Pooya, AlirezaTahbaz‐Salehi, and AliJadbabaie (2018), “A theory of non‐Bayesian social learning.” Econometrica, 86, 445-490. · Zbl 1419.91560
[26] Mossel, Elchanan, AllanSly, and OmerTamuz (2015), “Strategic learning and the topology of social networks.” Econometrica, 83, 1755-1794. · Zbl 1419.91561
[27] Mueller‐Frank, Manuel and ClaudiaNeri (2015), “A general model of boundedly rational observational learning: Theory and evidence.” Unpublished paper, SSRN 2566210.
[28] Mueller‐Frank, Manuel and ClaudiaNeri (2019), “A general analysis of boundedly rational learning in social networks.” Unpublished paper, SSRN 2933411.
[29] Sethi, Rajiv and MuhametYildiz (2012), “Public disagreement.” American Economic Journal: Microeconomics, 4, 57-95.
[30] Smith, Lones and PeterSørensen (2000), “Pathological outcomes of observational learning.” Econometrica, 68, 371-398. · Zbl 1023.91510
[31] Weizsäcker, Georg (2010), “Do we follow others when we should? A simple test of rational expectations.” American Economic Review, 100, 2340-2360.
This reference list is based on information provided by the publisher or from digital mathematics libraries. Its items are heuristically matched to zbMATH identifiers and may contain data conversion errors. In some cases that data have been complemented/enhanced by data from zbMATH Open. This attempts to reflect the references listed in the original paper as accurately as possible without claiming completeness or a perfect matching.