The Choices of Others: An Experiment on Social Search

When faced with unfamiliar alternatives, people often turn to the choices of others. A predecessor’s final choice may summarize information acquired through prior search, but using this compressed signal requires inferring what it reveals about the alternatives. We study this in a laboratory experiment where participants choose between two options of unknown quality and acquire information through costly sequential search. Some participants search in isolation; others begin searching after observing a peer's choice but not the peer's search process. We identify where observed behavior departs from the Bayesian benchmark and which institutional features reduce these departures. Boundedly rational participants partially follow the optimal search pattern, with under-imitation emerging as a primary source of inefficiency. Allowing participants to choose whom to observe mitigates this under-reaction to social information. These results suggest that institutional design can partly compensate for bounded rationality by making valuable social information easier to identify, trust, and use.