DP11020 An Experiment on Social Mislearning

Author(s): Erik Eyster, Matthew Rabin, Georg Weizs├Ącker
Publication Date: December 2015
Keyword(s): experiments, higher-order beliefs, redundancy neglect, social learning
JEL(s): B49
Programme Areas: Public Economics, Financial Economics, Industrial Organization
Link to this Page: www.cepr.org/active/publications/discussion_papers/dp.php?dpno=11020

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.