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Public Disagreement

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Author Info
Rajiv Sethi () (Department of Economics, Barnard College, Columbia University and Institute for Advanced Study)
Muhamet Yildiz () (Department of Economics, MIT and Institute for Advanced Study)

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Abstract

Members of different social groups often hold widely divergent public beliefs regarding the nature of the world in which they live. We develop a model that can accommodate such public disagreement, and use it to explore questions concerning the aggregation of distributed information and the consequences of social integration. The model involves heterogeneous priors, private information, and repeated communication until beliefs become public information. We show that when priors are correlated, all private information is eventually aggregated and public beliefs are identical to those arising under observable priors. When priors are independently distributed, however, some private information is never revealed and the expected value of public disagreement is greater when priors are unobservable than when they are observable. If the number of individuals is large, communication breaks down entirely in the sense that disagreement in public beliefs is approximately equal to disagreement in prior beliefs. Interpreting integration in terms of the observability of priors, we show how increases in social integration can give rise to less divergent public beliefs on average. Communication in segregated societies can cause initial biases to be amplified and new biases to emerge where none previously existed. Even though all announcements are public and all signals equally precise, minority group members face a disadvantage in the interpretation of public information that results in medium run beliefs that are less closely aligned with the true state.

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Publisher Info
Paper provided by Institute for Advanced Study, School of Social Science in its series Economics Working Papers with number 0089.

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Length: 33 pages
Date of creation: Feb 2009
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Handle: RePEc:ads:wpaper:0089

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  1. Daron Acemoglu & Victor Chernozhukov & Muhamet Yildiz, 2009. "Fragility of Asymptotic Agreement under Bayesian Learning," Levine's Working Paper Archive 814577000000000139, David K. Levine. [Downloadable!]
  2. Tobias Adrian & Mark M. Westerfield, 2008. "Disagreement and learning in a dynamic contracting model," Staff Reports 269, Federal Reserve Bank of New York. [Downloadable!]
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  3. Jose A. Scheinkman & Wei Xiong, 2003. "Overconfidence and Speculative Bubbles," Journal of Political Economy, University of Chicago Press, vol. 111(6), pages 1183-1219, December. [Downloadable!] (restricted)
  4. Rajiv Sethi & Rohini Somanathan, 2004. "Inequality and Segregation," Journal of Political Economy, University of Chicago Press, vol. 112(6), pages 1296-1321, December.
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  5. Stephen Morris, 1996. "Speculative investor behavior and learning," Working Papers 96-5, Federal Reserve Bank of Philadelphia. [Downloadable!]
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  6. John Geanakoplos & Heracles M. Polemarchakis, 1982. "We Can't Disagree Forever," Cowles Foundation Discussion Papers 639, Cowles Foundation, Yale University. [Downloadable!]
  7. Muhamet Yildiz, 2003. "Bargaining without a Common Prior-An Immediate Agreement Theorem," Econometrica, Econometric Society, vol. 71(3), pages 793-811, 05. [Downloadable!] (restricted)
  8. Harrington, Joseph E, Jr, 1993. "Economic Policy, Economic Performance, and Elections," American Economic Review, American Economic Association, vol. 83(1), pages 27-42, March.
  9. Geanakoplos, John D. & Polemarchakis, Heraklis M., 1982. "We can't disagree forever," Journal of Economic Theory, Elsevier, vol. 28(1), pages 192-200, October. [Downloadable!] (restricted)
  10. Muhamet Yildiz, 2004. "Waiting to Persuade," The Quarterly Journal of Economics, MIT Press, vol. 119(1), pages 223-248, February. [Downloadable!] (restricted)
  11. Samuel Bowles & Glenn C. Loury & Rajiv Sethi, 2009. "Group Inequality," Economics Working Papers 0088, Institute for Advanced Study, School of Social Science. [Downloadable!]
  12. Abhijit Banerjee & Rohini Somanathan, 2001. "A Simple Model Of Voice," The Quarterly Journal of Economics, MIT Press, vol. 116(1), pages 189-227, February. [Downloadable!] (restricted)
  13. Shubham Chaudhuri & Rajiv Sethi, 2008. "Statistical Discrimination with Peer Effects: Can Integration Eliminate Negative Stereotypes?," Review of Economic Studies, Blackwell Publishing, vol. 75(2), pages 579-596, 04. [Downloadable!] (restricted)
  14. Harrison, J Michael & Kreps, David M, 1978. "Speculative Investor Behavior in a Stock Market with Heterogeneous Expectations," The Quarterly Journal of Economics, MIT Press, vol. 92(2), pages 323-36, May. [Downloadable!] (restricted)
  15. Kfir Eliaz & Ran Spiegler, 2007. "A Mechanism-Design Approach to Speculative Trade," Econometrica, Econometric Society, vol. 75(3), pages 875-884, 05. [Downloadable!] (restricted)
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