Heterogenous Agents in a Model

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Changing the Precision of the First Agent

Now let us introduce a small modification to the rather homogeneous society of the previous topic. In particular, let's ask the question: What if the first agent in the sequence just isn't as good at estimating the value of adopting the behavior? Furthermore, every other person in the sequence is aware of his inferiority. As a result, Agent 2, for example, will put less faith in the decision of Agent 1, and will trust his private information to a greater relative degree.

To see what happens, click the "Go" button several times, and observe as the society progresses. Agent 1's numeric display contains a number smaller than that of other Agents, representing the Agent's inferior intelligence, i.e. lower precision. Furthermore, most of the time, Agent 1's circle will be relatively smaller than that in previous slides, since the amount of information he can infer from his private signal is also relatively smaller. Note that for Agent 2, the public (blue) knowledge of the true concept occupies a smaller portion of the pie than the yellow, private information. Agent 2 knows that Agent 1 has less precision, and thus will always trust his own information.

At this point it's not clear, however, how the situation changes further down the line. From the point of view of Agent 7, for example, does the changing precision of Agent 1 increase or decrease the probability of an Informational Cascade? We take this matter up on the next slide.

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