Working Paper: NBER ID: w28887
Authors: Sushil Bikhchandani; David Hirshleifer; Omer Tamuz; Ivo Welch
Abstract: Social learning is the updating of beliefs based on the observation of others. It can lead to efficient aggregation of information, but also to inaccurate decisions, fragility of mass behaviors, and, in the case of information cascades, to complete blockage of learning. We review the theory of information cascades and social learning, and discuss important themes, insights and applications of this literature as it has developed over the last thirty years. We also highlight open questions and promising directions for further theoretical and empirical exploration.
Keywords: No keywords provided
JEL Codes: D7; D8; D9
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| social learning (C92) | decision-making outcomes (D70) |
| social learning (C92) | efficient aggregation of information (C43) |
| social learning (C92) | inaccurate decisions (D91) |
| observing actions of others (C92) | ignoring private signals (D82) |
| information cascades (D83) | collective errors (A30) |
| decisions of earlier agents (D70) | actions of later agents (Y50) |
| information cascade (D83) | uniform decisions (L67) |
| external shocks (F69) | changes in collective behavior (D70) |
| information externalities (D62) | blockage of social learning (C92) |
| structure of information transmission (L96) | quality of decision-making outcomes (D70) |