Social Learning with Coarse Inference
AbstractWe study social learning by boundedly rational agents. Agents take a decision in sequence, after observing their predecessors and a private signal. They are unable to make perfect inferences from their predecessors' decisions: they only understand the relation between the aggregate distribution of actions and the state of nature, and make their inferences accordingly. We show that, in a discrete action space, even if agents receive signals of unbounded precision, there are asymptotic inefficiencies. In a continuous action space, compared to the rational case, agents overweight early signals. Despite this behavioral bias, eventually agents learn the realized state of the world and choose the correct action. (JEL D82, D83)
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by David K. Levine in its series Levine's Working Paper Archive with number 814577000000000292.
Date of creation: 13 Jul 2009
Date of revision:
Contact details of provider:
Web page: http://www.dklevine.com/
Other versions of this item:
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-07-28 (All new papers)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Allison, G. & Fudenberg, D., 1992.
"Rules of Thumb for Social Learning,"
92-12, Massachusetts Institute of Technology (MIT), Department of Economics.
- Ellison, Glenn & Fudenberg, Drew, 1993. "Rules of Thumb for Social Learning," Scholarly Articles 3196332, Harvard University Department of Economics.
- G. Ellison & D. Fudenberg, 2010. "Rules of Thumb for Social Learning," Levine's Working Paper Archive 435, David K. Levine.
- Ellison, Glenn & Fudenberg, Drew, 1992. "Rules of Thumb for Social Learning," IDEI Working Papers 17, Institut d'Économie Industrielle (IDEI), Toulouse.
- Jehiel, Philippe, 2005.
"Analogy-based expectation equilibrium,"
Journal of Economic Theory,
Elsevier, vol. 123(2), pages 81-104, August.
- Philippe Jehiel & Frederic Koessler, 2005.
"Revisiting Games of Incomplete Information with Analogy-Based Expectations,"
THEMA Working Papers
2005-04, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
- Jehiel, Philippe & Koessler, Frédéric, 2008. "Revisiting games of incomplete information with analogy-based expectations," Games and Economic Behavior, Elsevier, vol. 62(2), pages 533-557, March.
- Philippe Jehiel & Frédéric Koessler, 2006. "Revisiting Games of Incomplete Information with Analogy-Based Expectations," Levine's Bibliography 122247000000000252, UCLA Department of Economics.
- Zwiebel, Jeffrey H. & Vayanos, Dimitri & DeMarzo, Peter M., 2001.
"Persuasion Bias, Social Influence, and Uni-Dimensional Opinions,"
1719, Stanford University, Graduate School of Business.
- Peter M. Demarzo & Dimitri Vayanos & Jeffrey Zwiebel, 2003. "Persuasion Bias, Social Influence, And Unidimensional Opinions," The Quarterly Journal of Economics, MIT Press, vol. 118(3), pages 909-968, August.
- Banerjee, Abhijit & Fudenberg, Drew, 2004.
Games and Economic Behavior,
Elsevier, vol. 46(1), pages 1-22, January.
- Hirshleifer, David & Teoh, Siew Hong, 2001.
"Herd Behavior and Cascading in Capital Markets: A Review and Synthesis,"
5186, University Library of Munich, Germany.
- David Hirshleifer & Siew Hong Teoh, 2003. "Herd Behaviour and Cascading in Capital Markets: a Review and Synthesis," European Financial Management, European Financial Management Association, vol. 9(1), pages 25-66.
- Banerjee, Abhijit V, 1992. "A Simple Model of Herd Behavior," The Quarterly Journal of Economics, MIT Press, vol. 107(3), pages 797-817, August.
- Antonio Guarino & Steffen Huck & Heike Harmgart, 2008. "When half the truth is better than the truth: A Theory of aggregate information cascades," WEF Working Papers 0046, ESRC World Economy and Finance Research Programme, Birkbeck, University of London.
- Sushil Bikhchandani & David Hirshleifer & Ivo Welch, 2010.
"A theory of Fads, Fashion, Custom and cultural change as informational Cascades,"
Levine's Working Paper Archive
1193, David K. Levine.
- Bikhchandani, Sushil & Hirshleifer, David & Welch, Ivo, 1992. "A Theory of Fads, Fashion, Custom, and Cultural Change in Informational Cascades," Journal of Political Economy, University of Chicago Press, vol. 100(5), pages 992-1026, October.
- Georg Weizsacker, 2010.
"Do We Follow Others When We Should? A Simple Test of Rational Expectations,"
American Economic Review,
American Economic Association, vol. 100(5), pages 2340-60, December.
- Weizsäcker, Georg, 2008. "Do We Follow Others When We Should? A Simple Test of Rational Expectations," IZA Discussion Papers 3616, Institute for the Study of Labor (IZA).
- Georg Weizsacker, 2008. "Do we follow others when we should? A simple test of rational expectations," LSE Research Online Documents on Economics 4945, London School of Economics and Political Science, LSE Library.
- Huck, Steffen & Oechssler, Jorg, 1998.
"Informational cascades with continuous action spaces,"
Elsevier, vol. 60(2), pages 163-166, August.
- Steffen Huck & Joerg Oechssler, 1997. "Informational Cascades with Continuous Action Spaces," Game Theory and Information 9710002, EconWPA.
- Dorothea K¸bler & Georg Weizs”cker, 2004. "Limited Depth of Reasoning and Failure of Cascade Formation in the Laboratory," Review of Economic Studies, Wiley Blackwell, vol. 71(2), pages 425-441, 04.
- Celen, Bogachan & Kariv, Shachar, 2004. "Observational learning under imperfect information," Games and Economic Behavior, Elsevier, vol. 47(1), pages 72-86, April.
- Gale, Douglas, 1996. "What have we learned from social learning?," European Economic Review, Elsevier, vol. 40(3-5), pages 617-628, April.
- Guarino, Antonio & Harmgart, Heike & Huck, Steffen, 2011. "Aggregate information cascades," Games and Economic Behavior, Elsevier, vol. 73(1), pages 167-185, September.
- Christoph March, 2011. "Adaptive social learning," Working Papers halshs-00572528, HAL.
- Antonio Guarino & Antonella Ianni, 2010. "Bayesian Social Learning with Local Interactions," Games, MDPI, Open Access Journal, vol. 1(4), pages 438-458, October.
- Christoph March, 2011. "Adaptive social learning," PSE Working Papers halshs-00572528, HAL.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (David K. Levine).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.