Social Learning With State-Dependent Observations

Carl Heese ()

CRC TR 224 Discussion Paper Series from University of Bonn and University of Mannheim, Germany

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, 2011).

Keywords: Social Learning; Confounded Learning (search for similar items in EconPapers)
JEL-codes: D83 (search for similar items in EconPapers)
Pages: 5
Date: 2020-10
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