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Social Learning in a Changing World

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  • Smith, L

Abstract

In the social learning model of Banerjee and Bikhchandani, Hirshleiger and Welch, individuals take action sequentially after observing the history of actions taken by the predecessors and an informative private signal. If the state of the world is changing stochastically over time during the learing process, only temporary informational cascades - situations where socially valuable information is wasted - can arise. Furthermore, no cascade ever arises when the environment changes in a sufficiently unpredictable way.

Suggested Citation

  • Smith, L, 1996. "Social Learning in a Changing World," Working papers 96-34, Massachusetts Institute of Technology (MIT), Department of Economics.
    • Handle: RePEc:mit:worpap:96-34
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    References listed on IDEAS

    as
    1. Godfrey Keller & Sven Rady, 1999. "Optimal Experimentation in a Changing Environment," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 66(3), pages 475-507.
    2. Marco Ottaviani & Giuseppe Moscarini & Lones Smith, 1998. "Social learning in a changing world," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 11(3), pages 657-665.
    3. Rustichini, Aldo & Wolinsky, Asher, 1995. "Learning about variable demand in the long run," Journal of Economic Dynamics and Control, Elsevier, vol. 19(5-7), pages 1283-1292.
    4. 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.
    5. Lones Smith & Peter Sorensen, 2000. "Pathological Outcomes of Observational Learning," Econometrica, Econometric Society, vol. 68(2), pages 371-398, March.
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    More about this item

    Keywords

    LEARNING;

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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