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Title: An Experiment on Social Mislearning

Author(s): Erik Eyster, Matthew Rabin and Georg Weizs�cker

Publication Date: December 2015

Keyword(s): experiments, higher-order beliefs, redundancy neglect and social learning

Programme Area(s): Financial Economics, Industrial Organization and Public Economics

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.

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Bibliographic Reference

Eyster, E, Rabin, M and Weizs�cker, G. 2015. 'An Experiment on Social Mislearning'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=11020