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Bayesian Learning In Social Networks

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Executive Summary

The authors study the perfect Bayesian equilibrium of a model of learning over a general social network. Each individual receives a signal about the underlying state of the world, observes the past actions of a stochastically-generated neighborhood of individuals, and chooses one of two possible actions. The stochastic process generating the neighborhoods defines the network topology (social network). The special case where each individual observes all past actions has been widely studied in the literature. They characterize pure-strategy equilibria for arbitrary stochastic and deterministic social networks and characterize the conditions under which there will be asymptotic learning - that is, the conditions under which, as the social network becomes large, individuals converge (in probability) to taking the right action.

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