Abstract

http://ssrn.com/abstract=2324154
 


 



Perspectives, Opinions, and Information Flows


Rajiv Sethi


Barnard College, Columbia University; Santa Fe Institute

Muhamet Yildiz


Massachusetts Institute of Technology (MIT) - Department of Economics

August 20, 2013

MIT Department of Economics Working Paper No. 13-23

Abstract:     
Consider a group of individuals with unobservable perspectives (subjective prior beliefs) about a sequence of states. In each period, each individual receives private information about the current state and forms an opinion (a posterior belief). He also chooses a target individual whose opinion is then observed. This choice involves a fundamental trade-off between well-informed targets, whose signals are precise, and well-understood targets, whose perspectives are well known by the observer. Observing an opinion provides information not just about the current state, but also about the target's perspective; hence observed individuals become better-understood over time. This leads to path dependence and the possibility that some individuals never observe certain others in the long run. We identify a simple condition under which long-run behavior is efficient and history-independent. When this condition fails, with positive probability, a single individual emerges as an opinion leader in the long-run. Moreover, the extent to which an individual learns about a target's perspective depends on how well-informed both agents are in the period of observation. This gives rise to symmetry breaking, and can result in observational networks involving information segregation, or static graphs with rich and complex structures.

Number of Pages in PDF File: 43

Keywords: Beliefs, Heterogeneous Priors, Network Formation, Opinion Leadership, Segregation

JEL Classification: D82, D83, D85

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Date posted: September 12, 2013 ; Last revised: December 10, 2013

Suggested Citation

Sethi, Rajiv and Yildiz, Muhamet, Perspectives, Opinions, and Information Flows (August 20, 2013). MIT Department of Economics Working Paper No. 13-23. Available at SSRN: http://ssrn.com/abstract=2324154 or http://dx.doi.org/10.2139/ssrn.2324154

Contact Information

Rajiv Sethi
Barnard College, Columbia University ( email )
3009 Broadway
New York, NY 10027
United States
212-854-5140 (Phone)
212-854-8947 (Fax)
Santa Fe Institute
1399 Hyde Park Road
Santa Fe, NM 87501
United States
Muhamet Yildiz (Contact Author)
Massachusetts Institute of Technology (MIT) - Department of Economics ( email )
50 Memorial Drive
Room E52-371a
Cambridge, MA 02142
United States
617-253-5331 (Phone)
617-253-6915 (Fax)
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