Working Paper: CEPR ID: DP11020
Authors: Erik Eyster; Matthew Rabin; Georg Weizsäcker
Abstract: We investigate experimentally whether social learners appreciate the redundancy of information conveyed by their observed predecessors' actions. Each participant observes a private signal and enters an estimate of the sum of all earlier-moving participants' signals plus her own. In a first treatment, participants move single-file and observe all predecessors' entries; Bayesian Nash Equilibrium (BNE) predicts that each participant simply add her signal to her immediate predecessor's entry. Although 75% of participants do so, redundancy neglect by the other 25% generates excess imitation and mild inefficiencies. In a second treatment, participants move four per period; BNE predicts that most players anti-imitate some observed entries. Such anti-imitation occurs in 35% of the most transparent cases, and 16% overall. The remaining redundancy neglect creates dramatic excess imitation and inefficiencies: late-period entries are far too extreme, and on average participants would earn substantially more by ignoring their predecessors altogether.
Keywords: experiments; higher-order beliefs; redundancy neglect; social learning
JEL Codes: B49
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| redundancy neglect (J65) | overimitation (O30) |
| redundancy neglect (J65) | inefficiencies (D61) |
| participants' decisions (D79) | observed actions of others (C92) |
| BNE predictions (E17) | participants' behavior (C92) |
| redundancy neglect (J65) | participants earning less (J31) |
| singlefile treatment (C21) | adherence to BNE strategies (B00) |
| multifile treatment (C32) | antiimitation (L15) |
| redundancy neglect (J65) | extreme entries (Y60) |
| late-period entries (Y60) | influence by earlier signals (C45) |