Social Learning and Selective Attention

32 Pages Posted: 9 Mar 2015 Last revised: 21 May 2021

See all articles by Andrew Caplin

Andrew Caplin

New York University (NYU) - Department of Economics; National Bureau of Economic Research (NBER)

John V. Leahy

New York University (NYU) - Department of Economics; National Bureau of Economic Research (NBER)

Filip Matějka

Charles University in Prague - CERGE-EI (Center for Economic Research and Graduate Education - Economics Institute)

Date Written: March 2015

Abstract

Popularity is self reinforcing. The attention garnered by popular options propels further interest in them. Yet rather than blindly follow the crowd, most pay attention to how well these items match their tastes. We model this role of social learning in guiding selective attention and market dynamics. We confirm that attention focuses on options that quickly achieve popularity. Information externalities render the chosen set smaller than socially optimal. This rationalizes antitrust policies that encourage early experimentation. When attention costs are based on Shannon entropy, optimal policies are computable. With rich data, optimal choices can be identified for all consumer types.

Suggested Citation

Caplin, Andrew and Leahy, John V. and Matějka, Filip, Social Learning and Selective Attention (March 2015). NBER Working Paper No. w21001, Available at SSRN: https://ssrn.com/abstract=2575487

Andrew Caplin (Contact Author)

New York University (NYU) - Department of Economics ( email )

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John V. Leahy

New York University (NYU) - Department of Economics ( email )

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National Bureau of Economic Research (NBER)

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Filip Matějka

Charles University in Prague - CERGE-EI (Center for Economic Research and Graduate Education - Economics Institute) ( email )

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7 Politickych veznu
Prague 1, 111 21
Czech Republic

HOME PAGE: http://www.cerge-ei.cz

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