Optional Disclosure and Observational Learning

Abstract

Observational learning theories often assume that people’s actions can be observed. Nevertheless, in many naturally occurring environments, individuals can choose whether to disclose their behavior to others. We theoretically analyze various disclosure rules and show that learning can be more efficient under the optional disclosure condition if decision makers adopt a selective disclosure rule. Data from a controlled laboratory experiment, however, suggest optional disclosure fails to increase learning efficiency due to insufficient selectiveness in disclosure decisions. The provision of public information regarding the effects of disclosure behavior on others significantly improves learning outcomes.

Keywords: observational learning, information cascade, optional disclosure