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And he found out that the average competitor could do

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Unformatted text preview: s Example III: The Role of Diversity—Is Greater Diversity Useful? “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 greater diversity. Perhaps more importantly, group decision-making fraught with difficulties. 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. Network effects. 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. 41...
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