Sequential Learning under Informational Ambiguity
34 Pages Posted: 14 Nov 2019 Last revised: 18 Aug 2022
Date Written: September 1, 2019
Abstract
This paper studies a sequential social learning problem in which individuals are ambiguous about other people’s data-generating processes. This paper finds that the occurrence of an information cascade can be interpreted as a result of ambiguity instead of details of the true data-generating process or its perception, as suggested by the literature. When there is sufficient ambiguity, an information cascade occurs almost surely for all possible data-generating processes. This paper further shows that standard results that feature no cascade may be fragile to arbitrarily small ambiguity.
Keywords: Social learning, information cascades, ambiguity, herding
JEL Classification: D81, D83, C72
Suggested Citation: Suggested Citation