Observational learning in an uncertain world
We study a model of observational learning in social networks in the presence of uncertainty about agents' type distributions. Each individual receives a private noisy signal about a payoff-relevant state of the world, and can observe the actions of other agents who have made a decision before...
| Main Authors: | , , , |
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| Other Authors: | |
| Format: | Article |
| Language: | en_US |
| Published: |
Institute of Electrical and Electronics Engineers
2011
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| Online Access: | http://hdl.handle.net/1721.1/63091 https://orcid.org/0000-0002-1827-1285 https://orcid.org/0000-0002-1470-2148 https://orcid.org/0000-0003-0908-7491 |
| Summary: | We study a model of observational learning in social networks in the presence of uncertainty about agents' type distributions. Each individual receives a private noisy signal about a payoff-relevant state of the world, and can observe the actions of other agents who have made a decision before her. We assume that agents do not observe the signals and types of others in the society, and are also uncertain about the type distributions. We show that information is correctly aggregated when preferences of different types are closely aligned. On the other hand, if there is sufficient heterogeneity in preferences, uncertainty about type distributions leads to potential identification problems, preventing asymptotic learning. We also show that even though learning is guaranteed to be incomplete ex ante, there are sample paths over which agents become certain about the underlying state of the world. |
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