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Learning from private and public observations of othersʼ actions

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  • Amador, Manuel
  • Weill, Pierre-Olivier

Abstract

We study the diffusion of dispersed private information in a large economy, where agents learn from the actions of others through two channels: a public channel, such as equilibrium market prices, and a private channel, for example local interactions. We show that, when agents learn only from the public channel, an initial release of public information increases agentsʼ total knowledge at all times and increases welfare. When a private learning channel is present, this result is reversed: more initial public information reduces agents asymptotic knowledge by an amount in order of log(t) units of precision. When agents are sufficiently patient, this reduces welfare.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Theory.

Volume (Year): 147 (2012)
Issue (Month): 3 ()
Pages: 910-940

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Handle: RePEc:eee:jetheo:v:147:y:2012:i:3:p:910-940

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Web page: http://www.elsevier.com/locate/inca/622869

Related research

Keywords: Information aggregation; Learning; Value of information;

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Citations

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Cited by:
  1. Tarek Alexander Hassan & Thomas Mertens, 2014. "Information Aggregation in a DSGE Model," NBER Chapters, in: NBER Macroeconomics Annual 2014, Volume 29 National Bureau of Economic Research, Inc.
  2. Makarov, Igor & Rytchkov, Oleg, 2012. "Forecasting the forecasts of others: Implications for asset pricing," Journal of Economic Theory, Elsevier, vol. 147(3), pages 941-966.
  3. Tarek A. Hassan & Thomas M. Mertens, 2011. "The Social Cost of Near-Rational Investment," NBER Working Papers 17027, National Bureau of Economic Research, Inc.
  4. Avanidhar Subrahmanyam & Sheridan Titman, 2013. "Financial Market Shocks and the Macroeconomy," NBER Working Papers 19383, National Bureau of Economic Research, Inc.
  5. Kenza Benhima, 2013. "Booms and Busts with dispersed information," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 13.11, Université de Lausanne, Faculté des HEC, DEEP.
  6. Tarek A. Hassan & Thomas M. Mertens, 2014. "Information Aggregation in a DSGE Model," NBER Working Papers 20193, National Bureau of Economic Research, Inc.

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