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Observational Learning: Evidence from a Randomized Natural Field Experiment

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  • Hongbin Cai
  • Yuyu Chen
  • Hanming Fang

Abstract

We report results from a randomized natural field experiment conducted in a restaurant dining setting to distinguish the observational learning effect from the saliency effect. We find that, when customers are given ranking information of the five most popular dishes, the demand for those dishes increases by 13 to 20 percent. We do not find a significant saliency effect. We also find modest evidence that the observational learning effects are stronger among infrequent customers, and that dining satisfaction is increased when customers are presented with the information of the top five dishes, but not when presented with only names of some sample dishes. (JEL C93, D83)

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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 99 (2009)
Issue (Month): 3 (June)
Pages: 864-82

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Handle: RePEc:aea:aecrev:v:99:y:2009:i:3:p:864-82

Note: DOI: 10.1257/aer.99.3.864
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  1. List John A., 2007. "Field Experiments: A Bridge between Lab and Naturally Occurring Data," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 5(2), pages 1-47, April.
  2. Besley, T. & Case, A., 1994. "Diffusion as a Learning Process: Evidence from HYV Cotton," Papers 174, Princeton, Woodrow Wilson School - Development Studies.
  3. Conley, T.G. & Udry, C.R., 2000. "Learning about a New Technology: Pineapple in Ghana," Papers 817, Yale - Economic Growth Center.
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  7. Glenn Harrison & John List, 2004. "Field experiments," Artefactual Field Experiments 00058, The Field Experiments Website.
  8. Giorgio Topa & Stephen Ross & Patrick Bayer, 2005. "Place of Work and Place of Residence: Informal Hiring Networks and Labor Market Outcomes," Working Papers 05-23, Center for Economic Studies, U.S. Census Bureau.
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  11. Charles F. Manski, 2000. "Economic Analysis of Social Interactions," Journal of Economic Perspectives, American Economic Association, vol. 14(3), pages 115-136, Summer.
  12. Bernheim, B Douglas, 1994. "A Theory of Conformity," Journal of Political Economy, University of Chicago Press, vol. 102(5), pages 841-77, October.
  13. Sushil Bikhchandani & David Hirshleifer & Ivo Welch, 1998. "Learning from the Behavior of Others: Conformity, Fads, and Informational Cascades," Journal of Economic Perspectives, American Economic Association, vol. 12(3), pages 151-170, Summer.
  14. Anderson, Lisa R & Holt, Charles A, 1997. "Information Cascades in the Laboratory," American Economic Review, American Economic Association, vol. 87(5), pages 847-62, December.
  15. Manski, C.F., 1991. "Identification of Endogenous Social Effects: the Reflection Problem," Working papers 9127, Wisconsin Madison - Social Systems.
  16. Lones Smith & Peter Sorensen, 2000. "Pathological Outcomes of Observational Learning," Econometrica, Econometric Society, vol. 68(2), pages 371-398, March.
  17. Bogaçhan Çelen & Shachar Kariv, 2004. "Distinguishing Informational Cascades from Herd Behavior in the Laboratory," American Economic Review, American Economic Association, vol. 94(3), pages 484-498, June.
  18. Edward Vytlacil & James J. Heckman, 2001. "Policy-Relevant Treatment Effects," American Economic Review, American Economic Association, vol. 91(2), pages 107-111, May.
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