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Social Learning in Networks: A Quantal Response Equilibrium Analysis of Experimental Data

  • Shachar Kariv
  • Syngjoo Choi
  • Douglas Gale

Individuals living in society are bound together by a social network and, in many social and economic situations, individuals learn by observing the behavior of others in their local environment. This process is called social learning. Learning in incomplete networks, where different individuals have different information, is especially challenging: because of the lack of common knowledge individuals must draw inferences about the actions others have observed, as well as about their private information. This paper reports an experimental investigation of learning in three-person networks and uses the theoretical framework of Gale and Kariv (Games Econ Behav 45:329–346, 2003 ) to interpret the data generated by the experiments. The family of three-person networks includes several non-trivial architectures, each of which gives rise to its own distinctive learning patterns. To test the usefulness of the theory in interpreting the data, we adapt the Quantal Response Equilibrium (QRE) model of Mckelvey and Palfrey (Games Econ Behav 10:6–38, 1995 ; Exp Econ 1:9–41, 1998 ). We find that the theory can account for the behavior observed in the laboratory in a variety of networks and informational settings. This provides important support for the use of QRE to interpret experimental data. Copyright Springer-Verlag 2012

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Paper provided by UCLA Department of Economics in its series Levine's Bibliography with number 843644000000000107.

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Date of creation: 22 Jul 2007
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Handle: RePEc:cla:levrem:843644000000000107
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  1. Bala, Venkatesh & Goyal, Sanjeev, 1998. "Learning from Neighbours," Review of Economic Studies, Wiley Blackwell, vol. 65(3), pages 595-621, July.
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  8. Esther Duflo & Emmanuel Saez, 2002. "The Role of Information and Social Interactions in Retirement Plan Decisions: Evidence from a Randomized Experiment," NBER Working Papers 8885, National Bureau of Economic Research, Inc.
  9. Kosfeld Michael, 2004. "Economic Networks in the Laboratory: A Survey," Review of Network Economics, De Gruyter, vol. 3(1), pages 1-23, March.
  10. Jacob Goeree & Thomas Palfrey & Brian Rogers, 2004. "Self-Correcting Information Cascades," Levine's Bibliography 122247000000000153, UCLA Department of Economics.
  11. 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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  13. Richard Mckelvey & Thomas Palfrey, 1998. "Quantal Response Equilibria for Extensive Form Games," Experimental Economics, Springer, vol. 1(1), pages 9-41, June.
  14. John Xu Zheng, 1996. "A consistent test of functional form via nonparametric estimation techniques," Journal of Econometrics, Elsevier, vol. 75(2), pages 263-289, December.
  15. Boğaçhan Çelen & Shachar Kariv, 2005. "An experimental test of observational learning under imperfect information," Economic Theory, Springer, vol. 26(3), pages 677-699, October.
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  19. repec:rne:rneart:v:3:y:2004:i:1:p:19-41 is not listed on IDEAS
  20. Syngjoo Choi, 2012. "A cognitive hierarchy model of learning in networks," Review of Economic Design, Springer, vol. 16(2), pages 215-250, September.
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