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Social learning in a changing world

Author

Listed:
  • Marco Ottaviani

    (Department of Economics and ELSE, University College London, Gower St., London WC1E 6BT, UK)

  • Giuseppe Moscarini

    (Department of Economics, Yale University, 28 Hillhouse Avenue, New Haven, CT 06510, USA)

  • Lones Smith

    (Department of Economics, Massachusetts Institute of Technology, 50 Memorial Dr., Cambridge, MA 02139, USA)

Abstract

In the social learning model of Banerjee [1] and Bikhchandani, Hirshleifer and Welch [2] individuals take actions sequentially after observing the history of actions taken by the predecessors and an informative private signal. If the state of the world is changing stochastically over time during the learning process, only temporary informational cascades - situations where socially valuable information is wasted - can arise. Furthermore, no cascade ever arises when the environment changes in a sufficiently unpredictable way.

Suggested Citation

  • Marco Ottaviani & Giuseppe Moscarini & Lones Smith, 1998. "Social learning in a changing world," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 11(3), pages 657-665.
    • Handle: RePEc:spr:joecth:v:11:y:1998:i:3:p:657-665
    Note: Received: December 5, 1996; revised version: February 11, 1997
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    1. Marco Ottaviani & Giuseppe Moscarini & Lones Smith, 1998. "Social learning in a changing world," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 11(3), pages 657-665.
    2. Rustichini, Aldo & Wolinsky, Asher, 1995. "Learning about variable demand in the long run," Journal of Economic Dynamics and Control, Elsevier, vol. 19(5-7), pages 1283-1292.
    3. Lones Smith & Peter Sorensen, 2000. "Pathological Outcomes of Observational Learning," Econometrica, Econometric Society, vol. 68(2), pages 371-398, March.
    4. Godfrey Keller & Sven Rady, 1999. "Optimal Experimentation in a Changing Environment," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 66(3), pages 475-507.
    5. Abhijit V. Banerjee, 1992. "A Simple Model of Herd Behavior," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(3), pages 797-817.
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    More about this item

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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