Social learning in a changing world

Marco Ottaviani, Giuseppe Moscarini and Lones Smith

Economic Theory, 1998, vol. 11, issue 3, 657-665

Abstract: In the social learning model of Banerjee [1] and Bikhchandani, Hirshleifer and Welch [2] individuals take actions sequentially after observing the history of actions taken by the predecessors and an informative private signal. If the state of the world is changing stochastically over time during the learning process, only temporary informational cascades - situations where socially valuable information is wasted - can arise. Furthermore, no cascade ever arises when the environment changes in a sufficiently unpredictable way.

Date: 1998-05-05
Note: Received: December 5, 1996; revised version: February 11, 1997
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Working Paper: Social Learning in a Changing World (1996)
Working Paper: Social Learning in a Changing World
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