Discussion paper
DP19616 A Robust Wisdom of the Crowd
This paper studies a model of observational learning where a sequence of agents each choose among risky actions (e.g., which technological innovation to adopt), the outcome of which is a function of an unknown state. Agents observe past choices and outcomes, but are short-lived and do not internalize the informational value of their actions. The main result is a “robust wisdom of the crowd”: a characterization of the set of information structures under which agents, without any intervention, all choose the socially optimal action, at any history, for any number of agents, and any prior.
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