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Information Cascades and Social Learning

Author

Listed:
  • Sushil Bikhchandani
  • David Hirshleifer
  • Omer Tamuz
  • Ivo Welch

Abstract

Social learning is the updating of beliefs based on the observation of others. It can lead to efficient aggregation of information, but also to inaccurate decisions, fragility of mass behaviors, and, in the case of information cascades, to complete blockage of learning. We review the theory of information cascades and social learning, and discuss important themes, insights and applications of this literature as it has developed over the last thirty years. We also highlight open questions and promising directions for further theoretical and empirical exploration.

Suggested Citation

  • Sushil Bikhchandani & David Hirshleifer & Omer Tamuz & Ivo Welch, 2021. "Information Cascades and Social Learning," NBER Working Papers 28887, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:28887
    Note: AP CF DEV EH IO LE LS PE POL PR
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    Citations

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    Cited by:

    1. Daria Fedyaeva & Georgy Lukyanov & Hannah Tolli'e, 2025. "Learning to Unlearn: Education as a Remedy for Misspecified Beliefs," Papers 2510.24735, arXiv.org.
    2. Florian Brandl, 2025. "The Social Learning Barrier," Papers 2504.12136, arXiv.org, revised Aug 2025.
    3. Moshe Maor, 2025. "Towards a theory of policy bubbles," Policy Sciences, Springer;Society of Policy Sciences, vol. 58(2), pages 403-424, June.
    4. Toxopeus, Helen & Polzin, Friedemann & Cai, Wanxiang & Huisman, Ronald, 2025. "Investor types and campaign dynamics in investment crowdfunding: A herding and collective action perspective," Research Policy, Elsevier, vol. 54(9).
    5. Hirshleifer, David & Teoh, Siew Hong, 2008. "Thought and Behavior Contagion in Capital Markets," MPRA Paper 9164, University Library of Munich, Germany.
    6. Peng, Diefeng & Rao, Yulei & Sun, Xianming & Xiao, Erte, 2025. "Optional disclosure and observational learning," Journal of Economic Behavior & Organization, Elsevier, vol. 229(C).
    7. Zikai Xu, 2022. "Observational Learning with Competitive Prices," Papers 2202.06425, arXiv.org, revised May 2022.
    8. Taewoo You, 2025. "Confirmation bias and herding behavior across the housing markets," Humanities and Social Sciences Communications, Palgrave Macmillan, vol. 12(1), pages 1-14, December.
    9. Li, Zhaomin & Cao, Qian & Luo, Jun & Niu, Xiaofei, 2025. "Gender differences in the tendency to follow private information: Evidence from a social learning game," China Economic Review, Elsevier, vol. 90(C).
    10. Arieli, Itai & Arigapudi, Srinivas, 2024. "Private signals and fast product adoption under incomplete information," Games and Economic Behavior, Elsevier, vol. 147(C), pages 377-387.
    11. Xuejun Jin & Jiawei Yu, 2022. "Does communication increase investors’ trading frequency? Evidence from a Chinese social trading platform," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 8(1), pages 1-32, December.
    12. Florian Mudekereza, 2025. "Aggregate Efficiency in Games," Papers 2501.13019, arXiv.org, revised Feb 2026.
    13. Smirnov, Aleksei & Starkov, Egor, 2025. "Designing social learning," European Economic Review, Elsevier, vol. 178(C).
    14. Orihara, Masanori & Eshraghi, Arman, 2022. "Corporate governance compliance and herding," International Review of Financial Analysis, Elsevier, vol. 80(C).
    15. Xu, Wenji, 2025. "Social learning through coarse signals of others' actions," Journal of Economic Theory, Elsevier, vol. 229(C).
    16. David Lagziel & Ehud Lehrer, 2021. "Dynamic Screening," Working Papers 2101, Ben-Gurion University of the Negev, Department of Economics.
    17. Moran Koren, 2023. "The Gatekeeper Effect: The Implications of Pre-Screening, Self-selection, and Bias for Hiring Processes," Papers 2312.17167, arXiv.org.
    18. Arieli, Itai & Ashkenazi-Golan, Galit & Peretz, Ron & Tsodikovich, Yevgeny, 2025. "Minimal contagious sets: Degree distributional bounds," Journal of Economic Theory, Elsevier, vol. 226(C).

    More about this item

    JEL classification:

    • D7 - Microeconomics - - Analysis of Collective Decision-Making
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • D9 - Microeconomics - - Micro-Based Behavioral Economics

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