Social Learning and Selective Attention

Andrew Caplin, John Leahy and Filip Matejka

No 21001, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Popularity is self reinforcing. The attention garnered by popular options propels further interest in them. Yet rather than blindly follow the crowd, most pay attention to how well these items match their tastes. We model this role of social learning in guiding selective attention and market dynamics. We confirm that attention focuses on options that quickly achieve popularity. Information externalities render the chosen set smaller than socially optimal. This rationalizes antitrust policies that encourage early experimentation. When attention costs are based on Shannon entropy, optimal policies are computable. With rich data, optimal choices can be identified for all consumer types.

JEL-codes: D83 (search for similar items in EconPapers)
Date: 2015-03
New Economics Papers: this item is included in nep-mic
Note: EFG
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.nber.org/papers/w21001.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:21001

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w21001

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().