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Non-Bayesian Social Learning, Second Version

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Author Info

  • Ali Jadbabaie

    ()
    (Department of Electrical and Systems Engineering, University of Pennsylvania)

  • Alvaro Sandroni

    ()
    (Kellogg School of Management, Northwestern University)

  • Alireza Tahbaz-Salehi

    ()
    (Laboratory for Information and Decision Systems,Massachusetts Institute of Technology)

Abstract

We develop a dynamic model of opinion formation in social networks. Relevant information is spread throughout the network in such a way that no agent has enough data to learn a payoff-relevant parameter. 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 (even though the neighbors’ views may be quite inaccurate). This non-Bayesian learning rule is motivated by the formidable complexity required to fully implement Bayesian updating in networks. We show that, under mild assumptions, repeated interactions lead agents to successfully aggregate information and to learn the true underlying state of the world. This result holds in spite of the apparent naıvite of agents’ updating rule, the agents’ need for information from sources (i.e., other agents) the existence of which they may not be aware of, the possibility that the most persuasive agents in the network are precisely those least informed and with worst prior views, and the assumption that no agent can tell whether their own views or their neighbors’ views are more accurate.

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File URL: http://economics.sas.upenn.edu/system/files/working-papers/10-005.pdf
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Bibliographic Info

Paper provided by Penn Institute for Economic Research, Department of Economics, University of Pennsylvania in its series PIER Working Paper Archive with number 10-005.

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Length: 25 pages
Date of creation: 01 Jun 2010
Date of revision: 01 Feb 2010
Handle: RePEc:pen:papers:10-005

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Related research

Keywords: Social networks; learning; information aggregation;

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Cited by:
  1. Alexander Ludwig & Alexander Zimper, 2012. "A decision-theoretic model of asset-price underreaction and overreaction to dividend news," Working Papers 201223, University of Pretoria, Department of Economics.
  2. Zhang, Hanzhe, 2013. "Evolutionary justifications for non-Bayesian beliefs," Economics Letters, Elsevier, vol. 121(2), pages 198-201.
  3. Jadbabaie, Ali & Molavi, Pooya & Sandroni, Alvaro & Tahbaz-Salehi, Alireza, 2012. "Non-Bayesian social learning," Games and Economic Behavior, Elsevier, vol. 76(1), pages 210-225.

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