Are People Subject to Persuasion Bias? Test of Degroot Model

69 Pages Posted: 28 Sep 2017

See all articles by Tatiana Mayskaya

Tatiana Mayskaya

National Research University Higher School of Economics - International College of Economics and Finance; National Research University Higher School of Economics - Faculty of Economics

Li Song

Independent

Date Written: September 27, 2017

Abstract

Theoretical paper DeMarzo, Vayanos, and Zwiebel (2003) proposes a model of information aggregation in networks when individuals are subject to persuasion bias. The term "persuasion bias" refers to a particular form of boundedly rational behavior when individuals connected into a network do not account for repetition in the information they acquire. We argue that under the assumption that agents form their beliefs as a weighted average of all information available to them, the persuasion bias assumption is equivalent to a generalized version of the famous DeGroot model (DeGroot (1974)). We test the persuasion bias hypothesis against the (generalized) Bayesian updating model and find support for the persuasion bias hypothesis. We also found a positive correlation between how well a subject fits the generalized DeGroot model, compared to the alternative generalized Bayesian updating model, and their performance in the experiment. Data suggest that the generalized DeGroot model better accommodates other subjects' deviations from equilibrium, which explains the positive correlation.

Suggested Citation

Mayskaya, Tatiana and Song, Li, Are People Subject to Persuasion Bias? Test of Degroot Model (September 27, 2017). Available at SSRN: https://ssrn.com/abstract=3043655 or http://dx.doi.org/10.2139/ssrn.3043655

Tatiana Mayskaya (Contact Author)

National Research University Higher School of Economics - International College of Economics and Finance ( email )

Pokrovski Bulvar 11, Korpus Zh, Office 715
Moscow, 109028
Russia

National Research University Higher School of Economics - Faculty of Economics ( email )

Shabolovka 26
Moscow, 119049
Russia

Li Song

Independent ( email )

No Address Available

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