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An Experimental Test of Advice and Social Learning

  • Bo\u{g}açhan Çelen


    (Graduate School of Business, Columbia University, New York, New York 10027)

  • Shachar Kariv


    (Department of Economics, University of California, Berkeley, Berkeley, California 94720)

  • Andrew Schotter


    (Department of Economics, New York University, New York, New York 10012)

Social learning describes any situation in which individuals learn by observing the behavior of others. In the real world, however, individuals learn not just by observing the actions of others but also from seeking advice. This paper introduces advice giving into the standard social-learning experiment of Çelen and Kariv (Çelen, B., S. Kariv. 2005. An experimental test of observational learning under imperfect information. Econom. Theory 26(3) 677-699). The experiments are designed so that both pieces of information--action and advice--are equally informative (in fact, identical) in equilibrium. Despite the informational equivalence of advice and actions, we find that subjects in a laboratory social-learning situation appear to be more willing to follow the advice given to them by their predecessor than to copy their action, and that the presence of advice increases subjects' welfare.

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Article provided by INFORMS in its journal Management Science.

Volume (Year): 56 (2010)
Issue (Month): 10 (October)
Pages: 1687-1701

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Handle: RePEc:inm:ormnsc:v:56:y:2010:i:10:p:1687-1701
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  1. A. Banerjee & Drew Fudenberg, 2010. "Word-of-Mouth Communication and Social Learning," Levine's Working Paper Archive 425, David K. Levine.
  2. Angela A. Hung & Charles R. Plott, 2001. "Information Cascades: Replication and an Extension to Majority Rule and Conformity-Rewarding Institutions," American Economic Review, American Economic Association, vol. 91(5), pages 1508-1520, December.
  3. Allison, G. & Fudenberg, D., 1992. "Rules of Thumb for Social Learning," Working papers 92-12, Massachusetts Institute of Technology (MIT), Department of Economics.
  4. 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.
  5. Jacob K. Goeree & Thomas R. Palfrey & Brian W. Rogers & Richard D. McKelvey, 2006. "Self-Correcting Information Cascades," Levine's Bibliography 321307000000000211, UCLA Department of Economics.
  6. Schotter, A. & Merlo, A., 2000. "Learning By Not Doing: An Experimental Investigation of Observational Learning," Working Papers 00-10, C.V. Starr Center for Applied Economics, New York University.
  7. Smith, L. & Sorensen, P., 1996. "Pathological Outcomes of Observational Learning," Working papers 96-19, Massachusetts Institute of Technology (MIT), Department of Economics.
  8. V. Crawford & J. Sobel, 2010. "Strategic Information Transmission," Levine's Working Paper Archive 544, David K. Levine.
  9. Banerjee, Abhijit V, 1992. "A Simple Model of Herd Behavior," The Quarterly Journal of Economics, MIT Press, vol. 107(3), pages 797-817, August.
  10. Boğaçhan Çelen & Shachar Kariv, 2005. "An experimental test of observational learning under imperfect information," Economic Theory, Springer, vol. 26(3), pages 677-699, October.
  11. Andrew Schotter & Barry Sopher, 2006. "Trust and trustworthiness in games: An experimental study of intergenerational advice," Experimental Economics, Springer, vol. 9(2), pages 123-145, June.
  12. Celen, Bogachan & Kariv, Shachar, 2004. "Observational learning under imperfect information," Games and Economic Behavior, Elsevier, vol. 47(1), pages 72-86, April.
  13. 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.
  14. Yaw Nyarko & Andrew Schotter & Barry Sopher, 2006. "On the informational content of advice: a theoretical and experimental study," Economic Theory, Springer, vol. 29(2), pages 433-452, October.
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