Advanced Search
MyIDEAS: Login

Social Learning with Payoff Complementarities

Contents:

Author Info

  • Amil Dasgupta

    (Yale University)

Registered author(s):

    Abstract

    We incorporate strategic complementarities into a multi-agent sequential choice model with observable actions and private information. In this framework agents are concerned with learning from predecessors, signalling to successors, and coordinating their actions with those of others. Coordination problems have hitherto been studied using static coordination games which do not allow for learning behavior. Social learning has been examined using games of sequential action under uncertainty, but in the absence of strategic complementarities (herding models). Our model captures the strategic behavior of static coordination games, the social learning aspect of herding models, and the signalling behavior missing from both of these classes of models in one unified framework. In sequential action problems with incomplete information, agents exhibit herd behavior if later decision makers assign too little importance to their private information, choosing instead to imitate their predecessors. In our setting we demonstrate that agents may exhibit either strong herd behavior (complete imitation) or weak herd behavior (overoptimism) and characterize the informational requirements for these distinct outcomes. We also characterize the informational requirements to ensure the possibility of coordination upon a risky but socially optimal action in a game with finite but unboundedly large numbers of players.

    Download Info

    If 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.
    File URL: http://fmwww.bc.edu/RePEc/es2000/0322.pdf
    File Function: main text
    Download Restriction: no

    Bibliographic Info

    Paper provided by Econometric Society in its series Econometric Society World Congress 2000 Contributed Papers with number 0322.

    as in new window
    Length:
    Date of creation: 01 Aug 2000
    Date of revision:
    Handle: RePEc:ecm:wc2000:0322

    Contact details of provider:
    Phone: 1 212 998 3820
    Fax: 1 212 995 4487
    Email:
    Web page: http://www.econometricsociety.org/pastmeetings.asp
    More information through EDIRC

    Related research

    Keywords:

    References

    References listed on IDEAS
    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.:
    as in new window
    1. Obstfeld, Maurice, 1998. " Open-Economy Macroeconomics: Developments in Theory and Policy," Scandinavian Journal of Economics, Wiley Blackwell, vol. 100(1), pages 247-75, March.
    2. Lones Smith & Peter Sorensen, 2000. "Pathological Outcomes of Observational Learning," Econometrica, Econometric Society, vol. 68(2), pages 371-398, March.
    3. Bulow, Jeremy I & Geanakoplos, John D & Klemperer, Paul D, 1985. "Multimarket Oligopoly: Strategic Substitutes and Complements," Journal of Political Economy, University of Chicago Press, vol. 93(3), pages 488-511, June.
    4. Avery, Christopher & Zemsky, Peter, 1998. "Multidimensional Uncertainty and Herd Behavior in Financial Markets," American Economic Review, American Economic Association, vol. 88(4), pages 724-48, September.
    5. Morris, Stephen & Shin, Hyun Song, 1997. "Unique Equilibrium in a Model of Self-fulfilling Currency Attacks," CEPR Discussion Papers 1687, C.E.P.R. Discussion Papers.
    6. Gale, Douglas, 1996. "What have we learned from social learning?," European Economic Review, Elsevier, vol. 40(3-5), pages 617-628, April.
    7. Obstfeld, Maurice, 1986. "Rational and Self-fulfilling Balance-of-Payments Crises," American Economic Review, American Economic Association, vol. 76(1), pages 72-81, March.
    8. 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.
    9. Kenneth A. Froot & David S. Scharfstein & Jeremy C. Stein, 1990. "Herd on the Street: Informational Inefficiencies in a Market with Short-Term Speculation," NBER Working Papers 3250, National Bureau of Economic Research, Inc.
    10. Banerjee, Abhijit V, 1992. "A Simple Model of Herd Behavior," The Quarterly Journal of Economics, MIT Press, vol. 107(3), pages 797-817, August.
    11. V.V. Chari & Patrick J. Kehoe, 2003. "Hot money," Staff Report 228, Federal Reserve Bank of Minneapolis.
    12. 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.
    13. Gul, Faruk & Lundholm, Russell, 1995. "Endogenous Timing and the Clustering of Agents' Decisions," Journal of Political Economy, University of Chicago Press, vol. 103(5), pages 1039-66, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as in new window

    Cited by:
    1. Drehmann, Mathias & Oechssler, Jörg & Roider, Andreas, 2005. "Herding With and Without Payoff Externalities - An Internet Experiment," CEPR Discussion Papers 5310, C.E.P.R. Discussion Papers.
    2. Frederic Koessler & Anthony Ziegelmeyer, 2004. "Parimutuel Betting under Asymmetric Information," Papers on Strategic Interaction 2003-34, Max Planck Institute of Economics, Strategic Interaction Group.
    3. Tatsuhiro SHICHIJO & Yuji NAKAYAMA, 2004. "A Way To Sell Goods With Network Externalities," Econometric Society 2004 Far Eastern Meetings 711, Econometric Society.
    4. VERGARI, Cecilia, 2004. "Herd behaviour, strategic complementarities and technology adoption," CORE Discussion Papers 2004063, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    5. Yorulmazer, Tanju, 2003. "Herd Behavior, Bank Runs and Information Disclosure," MPRA Paper 9513, University Library of Munich, Germany.

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:ecm:wc2000:0322. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christopher F. Baum).

    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.