Stationary Social Learning in a Changing Environment

70 Pages Posted: 19 Jan 2022 Last revised: 3 Nov 2022

See all articles by Raphaël Levy

Raphaël Levy

HEC Paris

Marcin Pęski

University of Toronto - Department of Economics

Nicolas Vieille

HEC Paris - Economics & Decision Sciences

Date Written: January 3, 2022

Abstract

We consider social learning in a changing world. With changing states, societies can remain responsive only if agents regularly act upon fresh information, which drastically limits the value of observational learning. When the state is close to persistent, a consensus whereby most agents choose the same action typically emerges. However, the consensus action is not perfectly correlated with the state, because societies exhibit inertia following state changes. Phases of inertia may be longer when signals are more precise, even if agents draw large samples of past actions, as actions then become too correlated within samples, thereby reducing informativeness and welfare.

Keywords: observational learning, herding

JEL Classification: D83

Suggested Citation

Levy, Raphaël and Pęski, Marcin and Vieille, Nicolas, Stationary Social Learning in a Changing Environment (January 3, 2022). HEC Paris Research Paper No. ECO/SCD-2022-1433, Available at SSRN: https://ssrn.com/abstract=3999770 or http://dx.doi.org/10.2139/ssrn.3999770

Raphaël Levy (Contact Author)

HEC Paris ( email )

1 rue de la Liberation
Jouy-en-Josas Cedex, 78351
France

Marcin Pęski

University of Toronto - Department of Economics ( email )

150 St. George Street
Toronto, Ontario M5S3G7
Canada

Nicolas Vieille

HEC Paris - Economics & Decision Sciences ( email )

Paris
France

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