Econometrica: Nov, 2016, Volume 84, Issue 6
Communication with Unknown Perspectives
Rajiv Sethi, Muhamet Yildiz
Consider a group of individuals with unobservable perspectives (subjective prior beliefs) about a sequence of states. In each period, each individual receives private information about the current state and forms an opinion (a posterior belief). She also chooses a target individual and observes the target's opinion. This choice involves a trade‐off between well-informed targets, whose signals are precise, and well-understood targets, whose perspectives are well known. Opinions are informative about the target's perspective, so observed individuals become better understood over time. We identify a simple condition under which long‐run behavior is history independent. When this fails, each individual restricts attention to a small set of experts and observes the most informed among these. A broad range of observational patterns can arise with positive probability, including opinion leadership and information segregation. In an application to areas of expertise, we show how these mechanisms generate own field bias and large field dominance.
Supplement to "Communication with Unknown Perspectives"
In this appendix we consider some additional properties of long-run dynamics in Section A. Section B contains three variants of our model: a two-sided case in which the sets of observers and experts are disjoint, a case with delayed observability of states, and a case with common priors but unobserved preferences. A model of shifting perspectives is explored in Section C.