Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/177708
Authors: 
Heidergott, Bernd
Huang, Jiaping
Lindner, Ines
Year of Publication: 
2018
Series/Report no.: 
Tinbergen Institute Discussion Paper TI 2018-018/II
Abstract: 
We study social learning in a social network setting where agents receive independent noisy signals about the truth. Agents naïvely update beliefs by repeatedly taking weighted averages of neighbors' opinions. The weights are fixed in the sense of representing average frequency and intensity of social interaction. However, the way people communicate is random such that agents do not update their belief in exactly the same way at every point in time. We show that even if the social network does not privilege any agent in terms of influence, a large society almost always fails to converge to the truth. We conclude that wisdom of crowds is an illusive concept and bares the danger of mistaking consensus for truth.
Subjects: 
Wisdom of crowds
social networks
information cascades
naive learning
JEL: 
D83
D85
C63
Document Type: 
Working Paper
Social Media Mentions:

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