Locally Bayesian learning in networks

Wei Li () and Xu Tan ()
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Wei Li: Department of Economics, University of British Columbia
Xu Tan: Department of Economics, University of Washington

Theoretical Economics, 2020, vol. 15, issue 1

Abstract: Agents in a network want to learn the true state of the world from their own signals and their neighbors' reports. Agents know only their local networks, consisting of their neighbors and the links among them. Every agent is Bayesian with the (possibly misspecified) prior belief that her local network is the entire network. We present a tractable learning rule to implement such locally Bayesian learning: each agent extracts new information using the full history of observed reports in her local network. Despite their limited network knowledge, agents learn correctly when the network is a social quilt, a tree-like union of cliques. But they fail to learn when a network contains interlinked circles (echo chambers), despite an arbitrarily large number of correct signals.

Keywords: Locally Bayesian learning; rational learning with misspecified priors; efficient learning in finite networks (search for similar items in EconPapers)
JEL-codes: D03 D83 D85 (search for similar items in EconPapers)
Date: 2020-02-03
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Citations: View citations in EconPapers (8)

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