Social Learning with State-Dependent Observations

Carl Heese

Publications: Working paper

Abstract

In this note, I study a variant of the canonical binary-state binary-choice social learning model (Bikhchandani et al., 1992). An individual would like to choose an action only in the high state. When making her own decision, she observes previous decision-makers who chose the action. Importantly, the likelihood of observing the action of previous decision-maker depends on the state. I show that when observing the action is more likely in the low state, the individual faces an inference problem: does she observe many actions because the state is high and previous decision-makers had private information about this or because the state is low and previous actions are more visible. In this situation, learning is confounded (Smith and Sorensen, 2000).
Original languageEnglish
Place of PublicationBonn
Number of pages5
Publication statusPublished - Oct 2020

Publication series

SeriesDiscussion Paper Series - CRC TR 224
Number222

Austrian Fields of Science 2012

  • 502021 Microeconomics

Keywords

  • Social learning

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