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Information flows and crashes in dynamic social networks

Author

Listed:
  • Phillip J. Monin

    (Federal Reserve Board of Governors)

  • Richard Bookstaber

    (University of California)

Abstract

We develop a dynamic model of information transmission and aggregation in social networks in which continued membership in the network is contingent on the accuracy of opinions. Agents have opinions about a state of the world and form links to others in a directed fashion probabilistically. Agents update their opinions by averaging those of their connections, weighted by how long their connections have been in the system. Agents survive or die based on how far their opinions are from the true state. In contrast to the results in the extant literature on DeGroot learning, we show through simulations that for some parameterizations the model cycles stochastically between periods of high connectivity, in which agents arrive at a consensus opinion close to the state, and periods of low connectivity, in which agents’ opinions are widely dispersed.

Suggested Citation

  • Phillip J. Monin & Richard Bookstaber, 2021. "Information flows and crashes in dynamic social networks," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 16(3), pages 471-495, July.
    • Handle: RePEc:spr:jeicoo:v:16:y:2021:i:3:d:10.1007_s11403-020-00310-5
    DOI: 10.1007/s11403-020-00310-5
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    References listed on IDEAS

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    More about this item

    Keywords

    Social networks; DeGroot learning; Dynamic network formation; Information transmission; Agent-based model; Crashes;
    All these keywords.

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification

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