Optional Disclosure and Observational Learning

46 Pages Posted: 23 Jul 2022

See all articles by Diefeng Peng

Diefeng Peng

Central South University

Yulei Rao

Central South University

Xianming Sun

Zhongnan University of Economics and Law - School of Finance

Erte Xiao

Monash University

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

Suggested Citation

Peng, Diefeng and Rao, Yulei and Sun, Xianming and Xiao, Erte, Optional Disclosure and Observational Learning. Available at SSRN: https://ssrn.com/abstract=4170759 or http://dx.doi.org/10.2139/ssrn.4170759

Diefeng Peng

Central South University ( email )

Changsha, 410083
China

Yulei Rao

Central South University ( email )

Changsha, 410083
China

Xianming Sun

Zhongnan University of Economics and Law - School of Finance ( email )

WenQuan Building, 182# Nanhu Avenue
East Lake High-tech Development Zone
Wuhan, Hubei 430073
China

Erte Xiao (Contact Author)

Monash University ( email )

23 Innovation Walk
Wellington Road
Clayton, Victoria 3800
Australia

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