Information Cascades and Social Learning

108 Pages Posted: 24 May 2021 Last revised: 8 Feb 2024

See all articles by Sushil Bikhchandani

Sushil Bikhchandani

University of California, Los Angeles - Anderson School of Management

David A. Hirshleifer

Marshall School of Business, USC; National Bureau of Economic Research (NBER)

Omer Tamuz

California Institute of Technology - Division of the Humanities and Social Sciences

Ivo Welch

University of California, Los Angeles (UCLA); National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: October 29, 2023

Abstract

Social learning is the updating of beliefs based on the observation of others. It can lead to efficient aggregation of information, but also to inaccurate decisions, fragility of mass behaviors, and, in the case of information cascades, to complete blockage of learning. We review the theory of information cascades and social learning, and discuss important themes, insights and applications of this literature as it has developed over the last thirty years. We also highlight open questions and promising directions for further theoretical and empirical exploration.

Keywords: Information Cascades, Social Learning, Herding, Fads, Fashion, Conformity, Culture

JEL Classification: D8, D7, D9

Suggested Citation

Bikhchandani, Sushil and Hirshleifer, David A. and Tamuz, Omer and Welch, Ivo, Information Cascades and Social Learning (October 29, 2023). Available at SSRN: https://ssrn.com/abstract=3851678 or http://dx.doi.org/10.2139/ssrn.3851678

Sushil Bikhchandani

University of California, Los Angeles - Anderson School of Management ( email )

110 Westwood Plaza
Los Angeles, CA 90095
United States
310-206-2686 (Phone)
310-825-1581 (Fax)

David A. Hirshleifer (Contact Author)

Marshall School of Business, USC ( email )

Marshall School of Business
Los Angeles, CA 90089
United States

HOME PAGE: http://https://sites.uci.edu/dhirshle/

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
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Omer Tamuz

California Institute of Technology - Division of the Humanities and Social Sciences ( email )

1200 East California Blvd.
Pasadena, CA 91125
United States

Ivo Welch

University of California, Los Angeles (UCLA) ( email )

110 Westwood Plaza
C519
Los Angeles, CA 90095-1481
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310-825-2508 (Phone)

HOME PAGE: http://www.ivo-welch.info

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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