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Conformism and diversity under social learning

Author

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  • Goyal, S.
  • Bala, V.

Abstract

When there are competing technologies or products with unknown payoffs which are adopted over time within a society, an important question is whether conformism or diversity will prevail. We use a learning model with local interactions to study this question. We show that the structure of information flows within a society helps to determine whether conformism or diversity obtains. We find that if information is public then society conforms to a single technology in the long run. On the other hand, if society consists of smaller groups of individuals and interaction within groups is more intense as compared to interaction across the groups, then two technologies can coexist and diversity obtains, in the long run. Our analysis involves a novel application of the Law of the Iterated Logarithm.

Suggested Citation

  • Goyal, S. & Bala, V., 1998. "Conformism and diversity under social learning," Econometric Institute Research Papers EI 9849, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
    • Handle: RePEc:ems:eureir:1526
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    Keywords

    Social learning; conformism/diversity; local interactions; networks;
    All these keywords.

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • Q16 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - R&D; Agricultural Technology; Biofuels; Agricultural Extension Services
    • R10 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General

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