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Inertia in social learning from a summary statistic

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  • Larson, Nathan

Abstract

We model normal-quadratic social learning with agents who observe a summary statistic over past actions, rather than complete action histories. Because an agent with a summary statistic cannot correct for the fact that earlier actions influenced later ones, even a small presence of old actions in the statistic can introduce very persistent errors. Depending on how fast these old actions fade from view, social learning can either be as fast as if agents’ private information were pooled (rate n) or it can slow to a crawl (rate ln n). We also examine extensions to learning from samples of actions, learning about a moving target, heterogeneous preferences, and biases toward own information.

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File URL: http://mpra.ub.uni-muenchen.de/32143/
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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 32143.

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Date of creation: 2008
Date of revision: Jul 2011
Handle: RePEc:pra:mprapa:32143

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Related research

Keywords: social learning; herding; speed of learning;

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References

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  1. 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.
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  7. 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).
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  9. Esther Dufluo & Emmanuel Saez, 2003. "The role of information and social interactions in retirement plan decisions: Evidence from a randomized experiment," Framed Field Experiments 00141, The Field Experiments Website.
  10. Peter M. DeMarzo & Dimitri Vayanos & Jeffrey Zwiebel, 2003. "Persuasion bias, social influence, and uni-dimensional opinions," LSE Research Online Documents on Economics 454, London School of Economics and Political Science, LSE Library.
  11. A. Banerjee & Drew Fudenberg, 2010. "Word-of-Mouth Communication and Social Learning," Levine's Working Paper Archive 425, David K. Levine.
  12. Vives, Xavier, 1993. "How Fast Do Rational Agents Learn?," Review of Economic Studies, Wiley Blackwell, vol. 60(2), pages 329-47, April.
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  14. Munshi, Kaivan, 2004. "Social learning in a heterogeneous population: technology diffusion in the Indian Green Revolution," Journal of Development Economics, Elsevier, vol. 73(1), pages 185-213, February.
  15. Celen, Bogachan & Kariv, Shachar, 2004. "Observational learning under imperfect information," Games and Economic Behavior, Elsevier, vol. 47(1), pages 72-86, April.
  16. Banerjee, Abhijit V, 1992. "A Simple Model of Herd Behavior," The Quarterly Journal of Economics, MIT Press, vol. 107(3), pages 797-817, August.
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Cited by:
  1. Vincent Mak & Rami Zwick, 2014. "Experimenting and learning with localized direct communication," Experimental Economics, Springer, vol. 17(2), pages 262-284, June.

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