Unformatted text preview: s Example III: The Role of Diversity—Is Greater Diversity
“Wisdom of the crowds”: combining the information of many,
particularly of those with diﬀerent perspectives and diverse
experiences, would lead to better decisions.
Francis Galton and Marquis de Condorcet: “average of a group is
wiser than its members”
Galton: people in the market guessing the weight of an ox: “The
average competitor was probably as well ﬁtted for making a just
estimate of the dressed weight of the ox, as an average voter is of
judging the merits of most political issues on which he votes.” And he
found out that the average competitor could do very well.
Condorcet jury theorem: apply the law of large numbers to opinions
that are independent draws from a random distribution with mean
equal to the “truth”. These perspectives suggest that large groups (“large networks”) can
reach better and more accurate decisions.
39 Networks: Lecture 1 Strategic Interactions Example III: The Role of Diversity (continued)
But “groupthink” (a version of herding) in large groups (networks).
Also cooperation and coordination much harder in groups with
Perhaps more importantly, group decision-making fraught with
Arrow’s Impossibility Theorem: it is impossible for a group to have a
decision rule that is eﬃcient and non-dictatorial (and that satisﬁes
the independence of irrelevant alternatives).
Why? Because of conﬂict of interest among group members.
The challenge to group decision-making.
Other challenges: diﬃculty of coordination, free-rider problems, and
communication problems. 40 Networks: Lecture 1 The Road Ahead The Rest of the Course
More on graph theory and social networks.
Random graphs and their applications.
Rich get richer phenomena on networks.
Spread of epidemics.
Game theory for the analysis of strategic interactions.
Game theory on networks.
Trust, cooperation and trade on networks.
Diﬀusion of innovation and ideas on networks.
Learning and information diﬀusion on networks: wisdom of the
crowds or wisdom of the few?
Markets vs. networks.
Decision-making in organizations, committees and societies.
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