Experiments on Belief Formation in Networks
Grimm V, Mengel F (2018)
Publication Language: English
Publication Type: Journal article, Original article
Publication year: 2018
Journal
DOI: 10.1093/jeea/jvy038
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 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.
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APA:
Grimm, V., & Mengel, F. (2018). Experiments on Belief Formation in Networks. Journal of the European Economic Association. https://dx.doi.org/10.1093/jeea/jvy038
MLA:
Grimm, Veronika, and Friederike Mengel. "Experiments on Belief Formation in Networks." Journal of the European Economic Association (2018).
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