29,213 research outputs found
Local non-Bayesian social learning with stubborn agents
We study a social learning model in which agents iteratively update their
beliefs about the true state of the world using private signals and the beliefs
of other agents in a non-Bayesian manner. Some agents are stubborn, meaning
they attempt to convince others of an erroneous true state (modeling fake
news). We show that while agents learn the true state on short timescales, they
"forget" it and believe the erroneous state to be true on longer timescales.
Using these results, we devise strategies for seeding stubborn agents so as to
disrupt learning, which outperform intuitive heuristics and give novel insights
regarding vulnerabilities in social learning
Contagious Synchronization and Endogenous Network Formation in Financial Networks
When banks choose similar investment strategies the financial system becomes
vulnerable to common shocks. We model a simple financial system in which banks
decide about their investment strategy based on a private belief about the
state of the world and a social belief formed from observing the actions of
peers. Observing a larger group of peers conveys more information and thus
leads to a stronger social belief. Extending the standard model of Bayesian
updating in social networks, we show that the probability that banks
synchronize their investment strategy on a state non-matching action critically
depends on the weighting between private and social belief. This effect is
alleviated when banks choose their peers endogenously in a network formation
process, internalizing the externalities arising from social learning.Comment: 41 pages, 10 figures, Journal of Banking & Finance 201
Beliefs in Network Games (Replaced by CentER DP 2008-05)
Networks can have an important effect on economic outcomes. Given the complexity of many of these networks, agents will generally not know their structure. We study the sensitivity of game-theoretical predictions to the specification of players’ (common) prior on the network in a setting where players play a fixed game with their neighbors and only have local information on the network structure. We show that two priors are close in a strategic sense if and only if (1) the priors assign similar probabilities to all events that involve a player and his neighbors, and (2) with high probability, a player believes, given his type, that his neighbors’ conditional beliefs are similar, and that his neighbors believe, given their type, that. . . the conditional beliefs of their neighbors are similar, for any number of iterations. Also, we show that the common but unrealistic assumptions that the size of the network is common knowledge or that the types of players are independent are far from innocuous: if these assumptions are violated, small probability events can have a large effect on outcomes through players’ conditional beliefs.Network games;incomplete information;higher order beliefs;continuity;random networks;population uncertainty
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