Martin Benedikt Busch defends his PhD thesis

Martin Benedikt Busch defends his PhD thesis: "The Formation and Persistence of Perceptions Statistical Inference and Social Networks"


Martin Benedikt Busch

Title: "The Formation and Persistence of Perceptions Statistical Inference and Social Networks"

Time and place: 17 June 2021 at 14:00 in CSS 26.2.21/ZOOM.

Link to attend the defense by ZOOM follows here:

An electronic copy of the thesis can be obtained here:

Assessment Committee

  • Associate Professor Nick Vikander, Department of Economics, University of Copenhagen, Denmark (chairman)
  • Professor Antonio Cabrales, Universidad Carlos III de Madrid, Spain
  • Professor Friederike Mengel, University of Essex, UK

Our decisions often depend on our subjective perceptions of the surrounding reality and we base our perceptions on the information we have available to us. Consider for instance our assessments of a variety of societal challenges we face, from immigration to inequality. Our perceptions of the severity of these problems depend on the information we extract from the networks around us, consisting of our friends, colleagues, and neighbors, among others. Importantly, our networks might not be representative of the broader population, they might be too small to make valid inferences, or we may not have the ability to process the information efficiently. This results in a gap between subjective perceptions and the objective reality, leading to unintended behavior affecting the individual and the society. To understand the implications of the gap between perception and reality, we need a better understanding of how people form perceptions and the underlying mechanisms creating this gap. We need to investigate the persistence of this gap and consider its long-term consequences. Finally, we may want to test if perceptions are malleable and design interventions to change behavior.

This thesis comprises three self-contained articles that provide new insights on the formation of perceptions and their persistence using economic theory and experiments. The common theme in Chapter 1 and 2 is that agents in both models act as statisticians. Agents perform statistical inference given their information about others, the amount of information available, and heterogeneity in how they use information, to estimate an unknown but payoff-relevant state. The modeling approach allows us to show and disentangle how sample size and heterogeneity in agents’ use of information affects perception and behavior. In both chapters, the sample of data is not representative of the payoff-relevant state as sample selection (Chapter 1) or networks (Chapter 2) bias the data generating process. In Chapter 3, we illustrate how to manipulate perceptions and evaluate its long-term impact on behavior and welfare of subjects embedded in networks. In our laboratory experiment, we show that a simple nudge has long-term payoff consequences, and persistently changes the structure of relationships subjects build with each other over time.