Diversity Fosters Learning in Environments with Experimentation and Social Learning

We study long-lived rational agents who learn through experimentation and observing each other’s actions. Experimentation and social learning, even when combined, often lead to learning failures as agents may stop experimenting due to the Rothschild effect or social conformity. We show that when there is diversity in preferences, there will be complete learning in the limit, thereby overcoming these learning failures. Our analysis demonstrates the critical interaction between experimentation, social learning, and diversity and provides a new rationale for the increasingly held view that diversity is crucial in institutions.