Statistical inference in social networks: how sampling bias and uncertainty shape decisions

Information precision and equilibrium beliefs

Abstract: We investigate how individuals form expectations about population behavior using statistical inference based on observations of their social relations. Misperceptions about others’ connectedness and behavior arise from sampling bias stemming from the friendship paradox and uncertainty from small samples. In a game where actions are strategic complements, we characterize the equilibrium and analyze equilibrium behavior. We allow for agent sophistication to account for the sampling bias and demonstrate how sophistication affects the equilibrium. We show how population behavior depends on both sources of misperceptions and illustrate when sampling uncertainty plays a critical role compared to sampling bias.

Andreas Bjerre-Nielsen
Andreas Bjerre-Nielsen
Associate Professor of Economics & Social Data Science

My research interests include applied machine learning and policy evaluation, in particular in the context of education.