The impact of interaction and social learning on aggregate expectations

Mark Bowden, Stuart McDonald

Research output: Journal PublicationArticlepeer-review

11 Citations (Scopus)

Abstract

We examine the effect of information sharing within small world networks. Agents receive a signal correlated with the state of the world (SoW) which is adjusted following discussions with neighbours. If one agent in the network, referred to as an expert, does not engage in social learning (that is they always follow their own signal) then all agents learn the SoW. It is found that volatility in the mean level of expectations varies with changes in the number of experts and the network structure. A trade-off emerges between the level of volatility and the speed at which agents learn of changes to the SoW. A second finding is that certain network structures lead to information cascades.

Original languageEnglish
Pages (from-to)289-306
Number of pages18
JournalComputational Economics
Volume31
Issue number3
DOIs
Publication statusPublished - Apr 2008
Externally publishedYes

Keywords

  • Expectations formation
  • Information contagion
  • Network economics
  • Social learning
  • Volatility

ASJC Scopus subject areas

  • Economics, Econometrics and Finance (miscellaneous)
  • Computer Science Applications

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