The Role of Social Identity for Learning in Networks

• Applicant: Professorin Dr. Veronika Grimm
• Subject Area: Economic Theory ; Economic Policy, Applied Economics
• Term: from 2019 to 2024
• Project identifier: Deutsche Forschungsgemeinschaft (DFG) - Project number 428509607

The proposed project aims to investigate the effect of social identity on the dynamics of social learning in networks. Learning through social networks today plays a key role in individuals’, firms’, and governments’ decision-making processes. Acknowledging the crucial impact of social learning on behaviour, there is already a large and growing theoretical and experimental literature aiming to understand learning in networks. In sum, the literature has shown that the structure of the social network has profound influence on the dynamics of social learning. Experimental studies mostly focused on how cognitive limitations can lead to failures of Bayesian learning in networks. None of the experimental papers have so far deeply studied the role of social identity for social learning. This will be the main contribution of this project.We develop an experimental setup to study belief formation and social learning in networks. We implement the interaction between identity groups by interconnecting laboratories between two countries, using nationality as social identity. Participants interact on a network and face the task to answer factual questions from various areas of expertise. They simultaneously and repeatedly guess the true answer, observing the guesses of their network neighbors in each period. Across treatments we vary information on the social identity of the neighbors. In a sequence of studies, we analyse different network sizes as well as exogenous and endogenous network structures. We complement our experimental studies with theoretical analysis.The main contributions we expect to make are the following: (1) We identify the effect of social identity on learning in networks in a clean and simple setting. In particular, we provide a test whether individuals overweight opinions from people who share their social identity. (2) We contribute to an understanding how social identity is used in social learning and how this affects the outcome. Does it improve efficiency, in particular increase the speed of learning, or does it lead to distortions and failure to learn? Discrimination can, for example, increase the speed of learning if social identity is a good proxy for expertise. (3) We will study how different social network structures influence the dynamics of social learning and discriminatory behaviour. The interplay between social identity and learning dynamics will be addressed in larger networks that allow to test a variety of different network configurations. (4) We study how social identity affects the formation of social networks and thus the source of information that people consult. In particular, we are interested in whether different social networks will emerge endogenously in the presence or absence of information on social identity and how this influences social welfare. In principle, it is not clear whether endogenous network formation is beneficial or detrimental to social learning.

• DFG Programme: Research Grants
• International Connection: United Kingdom
• Cooperation Partner: Professorin Dr. Friederike Mengel