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Social learning in a changing world

  • 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)

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.

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Article provided by Springer in its journal Economic Theory.

Volume (Year): 11 (1998)
Issue (Month): 3 ()
Pages: 657-665

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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. Aldo Rustichini & Asher Wolinsky, 1992. "Learning about Variable Demand in the Long Run," Discussion Papers 1015, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  2. Giuseppe Moscarin & Marco Ottaviani & Lones Smith, . "Social Learning in a Changing World," ELSE working papers 010, ESRC Centre on Economics Learning and Social Evolution.
  3. Smith, L. & Sorensen, P., 1996. "Pathological Outcomes of Observational Learning," Working papers 96-19, Massachusetts Institute of Technology (MIT), Department of Economics.
  4. Godfrey Keller & Sven Rady, 1998. "Optimal Experimentation in a Changing Environment," Game Theory and Information 9801001, EconWPA.
  5. 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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