Experiments on Belief Formation in Networks
(2020) In Journal of the European Economic Association 18(1). p.49-82- Abstract
We study belief formation in social networks using a laboratory experiment. Participants in our experiment observe an imperfect private signal on the state of the world and then simultaneously and repeatedly guess the state, observing the guesses of their network neighbors in each period. Across treatments we vary the network structure and the amount of information participants have about the network. Our first result shows that information about the network structure matters and in particular affects the share of correct guesses in the network. This is inconsistent with the widely used naive (deGroot) model. The naive model is, however, consistent with a larger share of individual decisions than the competing Bayesian model, whereas... (More)
We study belief formation in social networks using a laboratory experiment. Participants in our experiment observe an imperfect private signal on the state of the world and then simultaneously and repeatedly guess the state, observing the guesses of their network neighbors in each period. Across treatments we vary the network structure and the amount of information participants have about the network. Our first result shows that information about the network structure matters and in particular affects the share of correct guesses in the network. This is inconsistent with the widely used naive (deGroot) model. The naive model is, however, consistent with a larger share of individual decisions than the competing Bayesian model, whereas both models correctly predict only about 25%-30% of consensus beliefs. We then estimate a larger class of models and find that participants do indeed take network structure into account when updating beliefs. In particular they discount information from neighbors if it is correlated, but in a more rudimentary way than a Bayesian learner would.
(Less)
- author
- Grimm, Veronika and Mengel, Friederike LU
- organization
- publishing date
- 2020
- type
- Contribution to journal
- publication status
- published
- subject
- in
- Journal of the European Economic Association
- volume
- 18
- issue
- 1
- pages
- 34 pages
- publisher
- Wiley-Blackwell
- external identifiers
-
- scopus:85081924866
- ISSN
- 1542-4766
- DOI
- 10.1093/jeea/jvy038
- language
- English
- LU publication?
- yes
- id
- 467ffd9c-7b96-452d-85cf-9fd37b40bc84
- date added to LUP
- 2020-12-22 12:08:01
- date last changed
- 2022-04-26 22:47:29
@article{467ffd9c-7b96-452d-85cf-9fd37b40bc84,
abstract = {{<p>We study belief formation in social networks using a laboratory experiment. Participants in our experiment observe an imperfect private signal on the state of the world and then simultaneously and repeatedly guess the state, observing the guesses of their network neighbors in each period. Across treatments we vary the network structure and the amount of information participants have about the network. Our first result shows that information about the network structure matters and in particular affects the share of correct guesses in the network. This is inconsistent with the widely used naive (deGroot) model. The naive model is, however, consistent with a larger share of individual decisions than the competing Bayesian model, whereas both models correctly predict only about 25%-30% of consensus beliefs. We then estimate a larger class of models and find that participants do indeed take network structure into account when updating beliefs. In particular they discount information from neighbors if it is correlated, but in a more rudimentary way than a Bayesian learner would.</p>}},
author = {{Grimm, Veronika and Mengel, Friederike}},
issn = {{1542-4766}},
language = {{eng}},
number = {{1}},
pages = {{49--82}},
publisher = {{Wiley-Blackwell}},
series = {{Journal of the European Economic Association}},
title = {{Experiments on Belief Formation in Networks}},
url = {{http://dx.doi.org/10.1093/jeea/jvy038}},
doi = {{10.1093/jeea/jvy038}},
volume = {{18}},
year = {{2020}},
}