AbstractWe study individual ability to memorize and recall information about friendship networks using a combination of experiments and survey-based data. In the experiment subjects are shown a network, in which their location is exogenously assigned, and they are then asked questions about the network after it disappears. We find that subjects exhibit two main cognitive biases: (i) they underestimate the mean degree compared to the actual network and (ii) they underestimate (overestimate) the number of frequent (rare) degrees. We then analyze survey data from two `real' friendship networks from a Silicon Valley firm and from a University Research Center. We find, somewhat remarkably, that individuals in these real networks also exhibit these biases. The experiments yield three further findings: (iii) network cognition is affected by the subject's location, (iv) the accuracy of network cognition varies with the nature of the network, and (v) limitations in network cognition have payoff implications.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 8732.
Date of creation: Jan 2012
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Find related papers by JEL classification:
- Z1 - Other Special Topics - - Cultural Economics
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-03-28 (All new papers)
- NEP-EXP-2012-03-28 (Experimental Economics)
- NEP-NET-2012-03-28 (Network Economics)
- NEP-NEU-2012-03-28 (Neuroeconomics)
- NEP-SOC-2012-03-28 (Social Norms & Social Capital)
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