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Observational Learning: Evidence from a Randomized Natural Field Experiment

  • Hongbin Cai
  • Yuyu Chen
  • Hanming Fang

We report results from a randomized natural field experiment conducted in a restaurant dining setting to distinguish the observational learning effect from the saliency effect. We find that, when customers are given ranking information of the five most popular dishes, the demand for those dishes increases by 13 to 20 percent. We do not find a significant saliency effect. We also find modest evidence that the observational learning effects are stronger among infrequent customers, and that dining satisfaction is increased when customers are presented with the information of the top five dishes, but not when presented with only names of some sample dishes. (JEL C93, D83)

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Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 99 (2009)
Issue (Month): 3 (June)
Pages: 864-82

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Handle: RePEc:aea:aecrev:v:99:y:2009:i:3:p:864-82
Note: DOI: 10.1257/aer.99.3.864
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  1. John A. List, 2007. "Field Experiments: A Bridge Between Lab and Naturally-Occurring Data," NBER Working Papers 12992, National Bureau of Economic Research, Inc.
  2. Bernheim, B Douglas, 1994. "A Theory of Conformity," Journal of Political Economy, University of Chicago Press, vol. 102(5), pages 841-77, October.
  3. Timothy G. Conley & Christopher R. Udry, 2005. "Learning about a new technology: pineapple in Ghana," Proceedings, Federal Reserve Bank of San Francisco.
  4. Patrick Bayer & Stephen Ross & Giorgio Topa, 2005. "Place of Work and Place of Residence: Informal Hiring Networks and Labor Market Outcomes," NBER Working Papers 11019, National Bureau of Economic Research, Inc.
  5. Edward Vytlacil & James J. Heckman, 2001. "Policy-Relevant Treatment Effects," American Economic Review, American Economic Association, vol. 91(2), pages 107-111, May.
  6. Foster, Andrew D & Rosenzweig, Mark R, 1995. "Learning by Doing and Learning from Others: Human Capital and Technical Change in Agriculture," Journal of Political Economy, University of Chicago Press, vol. 103(6), pages 1176-1209, December.
  7. Jonathan E. Alevy & Michael S. Haigh & John A. List, 2007. "Information Cascades: Evidence from a Field Experiment with Financial Market Professionals," Journal of Finance, American Finance Association, vol. 62(1), pages 151-180, 02.
  8. Glenn W. Harrison & John A. List, 2004. "Field Experiments," Journal of Economic Literature, American Economic Association, vol. 42(4), pages 1009-1055, December.
  9. Anderson, Lisa R & Holt, Charles A, 1997. "Information Cascades in the Laboratory," American Economic Review, American Economic Association, vol. 87(5), pages 847-62, December.
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  11. Charles F. Manski, 2000. "Economic Analysis of Social Interactions," Journal of Economic Perspectives, American Economic Association, vol. 14(3), pages 115-136, Summer.
  12. Michael Kremer & Edward Miguel, 2003. "Networks, social learning, and technology adoption: The case of deworming drugs in kenya," Natural Field Experiments 00312, The Field Experiments Website.
  13. Smith, L. & Sorensen, P., 1996. "Pathological Outcomes of Observational Learning," Economics Papers 115, Economics Group, Nuffield College, University of Oxford.
  14. 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.
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  16. Charles F. Manski, 1993. "Identification of Endogenous Social Effects: The Reflection Problem," Review of Economic Studies, Oxford University Press, vol. 60(3), pages 531-542.
  17. repec:pri:rpdevs:besley_case_diffusion.pdf is not listed on IDEAS
  18. Chamley,Christophe P., 2004. "Rational Herds," Cambridge Books, Cambridge University Press, number 9780521824019, Junio.
  19. Chamley,Christophe P., 2004. "Rational Herds," Cambridge Books, Cambridge University Press, number 9780521530927, Junio.
  20. 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.
  21. Esther Duflo & Emmanuel Saez, 2000. "Participation and Investment Decisions in a Retirement Plan: The Influence of Colleagues' Choices," NBER Working Papers 7735, National Bureau of Economic Research, Inc.
  22. Abhijit V. Banerjee, 1992. "A Simple Model of Herd Behavior," The Quarterly Journal of Economics, Oxford University Press, vol. 107(3), pages 797-817.
  23. Bogaçhan Çelen & Shachar Kariv, 2004. "Distinguishing Informational Cascades from Herd Behavior in the Laboratory," American Economic Review, American Economic Association, vol. 94(3), pages 484-498, June.
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