Observational Learning: Evidence from a Randomized Natural Field Experiment

31 Pages Posted: 16 Oct 2007  

Hongbin Cai

Peking University - Guanghua School of Management

Yuyu Chen

Peking University - Guanghua School of Management

Hanming Fang

University of Pennsylvania - Department of Economics; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: October 2007

Abstract

We present results about the effects of observing others' choices, called observational learning, on individuals' behavior and subjective well-being in the context of restaurant dining from a randomized natural field experiment. Our experimental design aims to distinguish observational learning effect from saliency effect (because observing others' choices also makes these choices more salient). We find that, depending on specifications, the demand for the top 5 dishes was increased by an average of about 13 to 18 percent when these popularity rankings were revealed to the customers; in contrast, being merely mentioned as some sample dishes did not significantly boost their demand. Moreover, we find that, consistent with theoretical predictions, some modest evidence that observational learning effect was stronger among infrequent customers. We also find that customers' subjective dining experiences were improved when presented with the information about the top choices by other consumers, but not when presented with the names of some sample dishes.

Suggested Citation

Cai, Hongbin and Chen, Yuyu and Fang, Hanming, Observational Learning: Evidence from a Randomized Natural Field Experiment (October 2007). NBER Working Paper No. w13516. Available at SSRN: https://ssrn.com/abstract=1021994

Hongbin Cai

Peking University - Guanghua School of Management ( email )

Peking University
Beijing, Beijing 100871
China

Yuyu Chen

Peking University - Guanghua School of Management ( email )

Peking University
Beijing, Beijing 100871
China

Hanming Fang (Contact Author)

University of Pennsylvania - Department of Economics ( email )

160 McNeil Building
3718 Locust Walk
Philadelphia, PA 19104
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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