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Social Learning with Coarse Inference

Author

Listed:
  • Antonio Guarino

    (UCL - University College London [UCL])

  • Philippe Jehiel

    (UCL - University College London [UCL], PSE - Paris-Jourdan Sciences Economiques - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

Abstract

We study social learning by boundedly rational agents. Agents take a decision in sequence, after observing their predecessors and a private signal. They are unable to make perfect inferences from their predecessors' decisions: they only understand the relation between the aggregate distribution of actions and the state of nature, and make their inferences accordingly. We show that, in a discrete action space, even if agents receive signals of unbounded precision, there are asymptotic inefficiencies. In a continuous action space, compared to the rational case, agents overweight early signals. Despite this behavioral bias, eventually agents learn the realized state of the world and choose the correct action.

Suggested Citation

  • Antonio Guarino & Philippe Jehiel, 2013. "Social Learning with Coarse Inference," PSE-Ecole d'économie de Paris (Postprint) hal-00813047, HAL.
    • Handle: RePEc:hal:pseptp:hal-00813047
    DOI: 10.1257/mic.5.1.147
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    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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