Dynamics of Opinions and Cultural Traits on Endogenous Networks

• Applicant: Professor Dr. Tim Hellmann
• Subject Area: Economic Theory
• Term: from 2014 to 2016
• Project identifier: Deutsche Forschungsgemeinschaft (DFG) - Project number 259066127

Economic behavior and outcomes are fundamentally shaped by individual value systems such as culturally transmitted preferences, opinions, beliefs, etc. The question of how these cultural traits evolve throughout generations and how opinions form and manifest is hence of high interest for economists and other social scientists. There is substantial empirical evidence that local interactions play a crucial role in forming cultural traits and opinions. In recent years also theoretical models emphasize the importance of the underlying structure of interactions, i.e. the social network. These models often rely on a very simple model of opinion formation that has been originally proposed by [DeGroot, 1974]. There, individuals repeatedly exchange opinions by simply stating their opinion and update opinions according to a fixed and exogenous weighted average over all stated opinions. We propose a research project that develops a general model describing the dynamics of opinions and cultural traits. In particular we want to extend the [DeGroot, 1974]-approach in two ways. First, we want to challenge the assumption that individuals always report their opinions truthfully. In particular, we want to allow individuals to strategically express their opin-ions in attempts to persuade others, or to strategically exercise their cultural trait in order to influence own offspring. Second, we want to abstract from the assumption that the updating weights stay fixed over time. Rather, changes in the social network may occur either en-dogenously or exogenously. In the context of opinion dynamics this could mean that individ-uals place less weight on individuals with opinions that are detrimental with their own. When considering evolution of cultural traits throughout generations this could mean that parents can alter the social network of their children by deciding e.g. which school they go to. Precisely the interdependency of choice of opinion (respectively cultural traits) and changes in the network shall be the focus of the research proposal. Moreover, exogenous changes (shocks) to the network may be considered.We are therefore interested in the effect of introducing these extensions on the classical questions of the opinion dynamics and the cultural transmission literature: Will the dynamics converge or do we need additional assumptions? Which pa-rameters in the model influence the speed of convergence? How well is information aggregation, when individuals may misrepresent their true opinion? Additional to these questions the modeling approach may help finding results that have not been provided in the literature so far since we assume endogenous network formation: Can we observe coexistence of heter-ogeneous opinions (traits) in the long-run? How does the network evolve? For instance, can we observe segregation, and if so, how will this affect wisdom of the crowds? If there are several groups holding different opinions, which group is wiser?

• DFG Programme: Research Fellowships
• International Connection: Italy
• Host: Professor Dr. Fernando Vega Redondo