Private and Social Learning with Endogenous Timing: An Experimental Analysis

34 Pages Posted: 19 Jul 2013 Last revised: 25 Jan 2015

See all articles by Julian C. Jamison

Julian C. Jamison

World Bank eMBeD (Mind, Behavior, and Development); Innovations for Poverty Action

David M. Owens

Haverford College

Glenn Woroch

University of California, Berkeley; Compass Lexecon; Georgetown Center for Business & Public Policy

Date Written: November 1, 2014

Abstract

We conducted laboratory experiments to investigate how private and public information affect the selection and timing of technology adoption. Our experiments extend the standard herding model to more accurately represent the innovation decision problem. Subjects drew private signals and observed actions of their peer group before making an irreversible choice between a safe and a risky innovation. Free to choose the timing of their adoption, equilibrium behavior dictates adoption of the innovation favored by the first private signal. Nevertheless, roughly half of subjects delayed adoption beyond the first round. When they did adopt, subjects gave more weight to their private signals than to their peers' actions. The speed and accuracy of adoption decisions improved when subjects observed their peers' decisions, even when subjects' payoffs were statistically independent --- as if observation exerts "peer pressure'' on subjects. Finally we examined several plausible behavior rules and conclude that subjects find it profitable, on average, to wait until the second round and then follow their private signals.

Keywords: social learning, herding, information cascades, technology adoption

JEL Classification: C91, C92, D83, O31

Suggested Citation

Jamison, Julian C. and Owens, David M. and Woroch, Glenn, Private and Social Learning with Endogenous Timing: An Experimental Analysis (November 1, 2014). Available at SSRN: https://ssrn.com/abstract=2295611 or http://dx.doi.org/10.2139/ssrn.2295611

Julian C. Jamison

World Bank eMBeD (Mind, Behavior, and Development) ( email )

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Innovations for Poverty Action ( email )

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David M. Owens

Haverford College ( email )

Haverford, PA 19041
United States
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Glenn Woroch (Contact Author)

University of California, Berkeley ( email )

Department of Economics
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HOME PAGE: http://elsa.berkeley.edu/~woroch/

Compass Lexecon ( email )

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HOME PAGE: http://www.compasslexecon.com/professionals/bio?id=141

Georgetown Center for Business & Public Policy ( email )

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Washington, DC 20057
United States
202-687-3686 (Phone)

HOME PAGE: http://cbpp.georgetown.edu/

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