Social learning with endogenous observation

Yangbo Song

Journal of Economic Theory, 2016, vol. 166, issue C, 324-333

Abstract: I study the problem of social learning in a model where agents move sequentially. Each agent receives a private signal about the underlying state of the world, observes the past actions in a neighborhood of individuals, and chooses her action attempting to match the true state. In contrast to the most existing literature that assumes an exogenous observation structure, observation in this paper is endogenous. More specifically, each agent must pay a cost to make any observation and can strategically choose the set of actions to observe. I show that when private beliefs are strong relative to cost, observation becomes fully informative if and only if the size of the observed actions extends to infinity. In addition, costly observation may lead to better learning than free observation, and the order of acquiring signal and observation significantly affects the learning pattern.

Keywords: Information aggregation; Social learning; Herding; Information cascade; Information acquisition (search for similar items in EconPapers)
JEL-codes: C72 D62 D83 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:166:y:2016:i:c:p:324-333

DOI: 10.1016/j.jet.2016.09.005

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