IDEAS home Printed from https://ideas.repec.org/p/cla/levrem/784828000000000272.html
   My bibliography  Save this paper

An Experimental Test of Advice and Social Learning

Author

Listed:
  • Boðaçhan Çelen
  • Shachar Kariv
  • Andrew Schotter

Abstract

Social learning describes any situation in which individuals learn by observing the behavior of others. In the real world, however, individuals learn not just by observing the actions of others but also from seeking advice. This paper introduces advice giving into the standard social-learning experiment of Çelen and Kariv (Çelen, B., S. Kariv. 2005. An experimental test of observational learning under imperfect information. Econom. Theory 26(3) 677-699). The experiments are designed so that both pieces of information--action and advice--are equally informative (in fact, identical) in equilibrium. Despite the informational equivalence of advice and actions, we find that subjects in a laboratory social-learning situation appear to be more willing to follow the advice given to them by their predecessor than to copy their action, and that the presence of advice increases subjects' welfare.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Boðaçhan Çelen & Shachar Kariv & Andrew Schotter, 2006. "An Experimental Test of Advice and Social Learning," Levine's Bibliography 784828000000000272, UCLA Department of Economics.
  • Handle: RePEc:cla:levrem:784828000000000272
    as

    Download full text from publisher

    File URL: http://socrates.berkeley.edu/~kariv/CKS_I.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Angela A. Hung & Charles R. Plott, 2001. "Information Cascades: Replication and an Extension to Majority Rule and Conformity-Rewarding Institutions," American Economic Review, American Economic Association, vol. 91(5), pages 1508-1520, December.
    2. Boğaçhan Çelen & Shachar Kariv, 2005. "An experimental test of observational learning under imperfect information," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 26(3), pages 677-699, October.
    3. Judith Chevalier & Glenn Ellison, 1999. "Career Concerns of Mutual Fund Managers," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 114(2), pages 389-432.
    4. Bikhchandani, Sushil & Hirshleifer, David & Welch, Ivo, 1992. "A Theory of Fads, Fashion, Custom, and Cultural Change in Informational Cascades," Journal of Political Economy, University of Chicago Press, vol. 100(5), pages 992-1026, October.
    5. Banerjee, Abhijit & Fudenberg, Drew, 2004. "Word-of-mouth learning," Games and Economic Behavior, Elsevier, vol. 46(1), pages 1-22, January.
    6. Anderson, Lisa R & Holt, Charles A, 1997. "Information Cascades in the Laboratory," American Economic Review, American Economic Association, vol. 87(5), pages 847-862, December.
    7. Lamont, Owen A., 2002. "Macroeconomic forecasts and microeconomic forecasters," Journal of Economic Behavior & Organization, Elsevier, vol. 48(3), pages 265-280, July.
    8. Lones Smith & Peter Sorensen, 2000. "Pathological Outcomes of Observational Learning," Econometrica, Econometric Society, vol. 68(2), pages 371-398, March.
    9. Celen, Bogachan & Kariv, Shachar, 2004. "Observational learning under imperfect information," Games and Economic Behavior, Elsevier, vol. 47(1), pages 72-86, April.
    10. Bogaçhan Çelen & Shachar Kariv, 2004. "Distinguishing Informational Cascades from Herd Behavior in the Laboratory," American Economic Review, American Economic Association, vol. 94(3), pages 484-498, June.
    11. Andrew Schotter & Barry Sopher, 2006. "Trust and trustworthiness in games: An experimental study of intergenerational advice," Experimental Economics, Springer;Economic Science Association, vol. 9(2), pages 123-145, June.
    12. Gale, Douglas, 1996. "What have we learned from social learning?," European Economic Review, Elsevier, vol. 40(3-5), pages 617-628, April.
    13. Welch, Ivo, 2000. "Herding among security analysts," Journal of Financial Economics, Elsevier, vol. 58(3), pages 369-396, December.
    14. Harrison Hong & Jeffrey D. Kubik & Amit Solomon, 2000. "Security Analysts' Career Concerns and Herding of Earnings Forecasts," RAND Journal of Economics, The RAND Corporation, vol. 31(1), pages 121-144, Spring.
    15. Glenn Ellison & Drew Fudenberg, 1995. "Word-of-Mouth Communication and Social Learning," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 110(1), pages 93-125.
    16. Ananish Chaudhuri & Sara Graziano & Pushkar Maitra, 2006. "Social Learning and Norms in a Public Goods Experiment with Inter-Generational Advice -super-1," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 73(2), pages 357-380.
    17. Jacob K. Goeree & Thomas R. Palfrey & Brian W. Rogers & Richard D. McKelvey, 2007. "Self-Correcting Information Cascades," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 74(3), pages 733-762.
    18. Ellison, Glenn & Fudenberg, Drew, 1993. "Rules of Thumb for Social Learning," Journal of Political Economy, University of Chicago Press, vol. 101(4), pages 612-643, August.
    19. Yaw Nyarko & Andrew Schotter & Barry Sopher, 2006. "On the informational content of advice: a theoretical and experimental study," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 29(2), pages 433-452, October.
    20. Abhijit V. Banerjee, 1992. "A Simple Model of Herd Behavior," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(3), pages 797-817.
    21. Sushil Bikhchandani & David Hirshleifer & Ivo Welch, 1998. "Learning from the Behavior of Others: Conformity, Fads, and Informational Cascades," Journal of Economic Perspectives, American Economic Association, vol. 12(3), pages 151-170, Summer.
    22. Andrew Schotter & Barry Sopher, 2003. "Social Learning and Coordination Conventions in Intergenerational Games: An Experimental Study," Journal of Political Economy, University of Chicago Press, vol. 111(3), pages 498-529, June.
    23. John R. Graham, 1999. "Herding among Investment Newsletters: Theory and Evidence," Journal of Finance, American Finance Association, vol. 54(1), pages 237-268, February.
    24. Merlo, Antonio & Schotter, Andrew, 2003. "Learning by not doing: an experimental investigation of observational learning," Games and Economic Behavior, Elsevier, vol. 42(1), pages 116-136, January.
    25. Crawford, Vincent P & Sobel, Joel, 1982. "Strategic Information Transmission," Econometrica, Econometric Society, vol. 50(6), pages 1431-1451, November.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Hirshleifer, David & Teoh, Siew Hong, 2008. "Thought and Behavior Contagion in Capital Markets," MPRA Paper 9164, University Library of Munich, Germany.
    2. Boðaçhan Çelen & Shachar Kariv & Andrew Schotter, 2005. "Words Speak Louder than Actions and Improve Welfare: An Experimental Test of Advice and Social Learning," Levine's Bibliography 784828000000000250, UCLA Department of Economics.
    3. David Hirshleifer & Siew Hong Teoh, 2003. "Herd Behaviour and Cascading in Capital Markets: a Review and Synthesis," European Financial Management, European Financial Management Association, vol. 9(1), pages 25-66, March.
    4. Cao, H. Henry & Han, Bing & Hirshleifer, David, 2011. "Taking the road less traveled by: Does conversation eradicate pernicious cascades?," Journal of Economic Theory, Elsevier, vol. 146(4), pages 1418-1436, July.
    5. Jonathan E. Alevy & Michael S. Haigh & John List, 2006. "Information Cascades: Evidence from An Experiment with Financial Market Professionals," NBER Working Papers 12767, National Bureau of Economic Research, Inc.
    6. Shachar Kariv, 2005. "Overconfidence and Informational Cascades," Levine's Bibliography 122247000000000406, UCLA Department of Economics.
    7. Wang, Peiwen & Chen, Minghua & Wu, Ji & Yan, Yuanyun, 2023. "Do peer effects matter in bank risk? Some cross-country evidence," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 88(C).
    8. Puput Tri Komalasari & Marwan Asri & Bernardinus M. Purwanto & Bowo Setiyono, 2022. "Herding behaviour in the capital market: What do we know and what is next?," Management Review Quarterly, Springer, vol. 72(3), pages 745-787, September.
    9. Daron Acemoglu & Munther A. Dahleh & Ilan Lobel & Asuman Ozdaglar, 2011. "Bayesian Learning in Social Networks," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 78(4), pages 1201-1236.
    10. Drehmann, Mathias & Oechssler, Jorg & Roider, Andreas, 2007. "Herding with and without payoff externalities -- an internet experiment," International Journal of Industrial Organization, Elsevier, vol. 25(2), pages 391-415, April.
    11. James C. D. Fisher & John Wooders, 2017. "Interacting information cascades: on the movement of conventions between groups," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 63(1), pages 211-231, January.
    12. repec:awi:wpaper:0420 is not listed on IDEAS
    13. Ottaviani, Marco & Sorensen, Peter Norman, 2006. "Professional advice," Journal of Economic Theory, Elsevier, vol. 126(1), pages 120-142, January.
    14. Marco Ottaviani & Peter Norman Sorensen, 2002. "Professional Advice: The Theory of Reputational Cheap Talk," Discussion Papers 02-05, University of Copenhagen. Department of Economics.
    15. Bizer, Kilian & Meub, Lukas & Proeger, Till & Spiwoks, Markus, 2014. "Strategic coordination in forecasting: An experimental study," University of Göttingen Working Papers in Economics 195, University of Goettingen, Department of Economics.
    16. Syngjoo Choi & Douglas Gale & Shachar Kariv, 2012. "Social learning in networks: a Quantal Response Equilibrium analysis of experimental data," Review of Economic Design, Springer;Society for Economic Design, vol. 16(2), pages 135-157, September.
    17. Vincent Mak & Rami Zwick, 2014. "Experimenting and learning with localized direct communication," Experimental Economics, Springer;Economic Science Association, vol. 17(2), pages 262-284, June.
    18. Ottaviani, Marco & Sorensen, Peter Norman, 2006. "The strategy of professional forecasting," Journal of Financial Economics, Elsevier, vol. 81(2), pages 441-466, August.
    19. Larson, Nathan, 2015. "Inertia in social learning from a summary statistic," Journal of Economic Theory, Elsevier, vol. 159(PA), pages 596-626.
    20. Paul J. Healy & John Conlon & Yeochang Yoon, 2016. "Information Cascades with Informative Ratings: An Experimental Test," Working Papers 16-05, Ohio State University, Department of Economics.
    21. Sylvain Marsat, 2006. "Does The Consensus Prevail? Experimental Evidence," Working Papers hal-02156562, HAL.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cla:levrem:784828000000000272. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: David K. Levine (email available below). General contact details of provider: http://www.dklevine.com/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.