Social Learning in a Changing World
MIT Dept. of Economics Working Paper #96-34
Posted: 30 Jun 1997
Date Written: November 1996
In the social learning model of Banerjee (1992) and Kikhchandani, Hirshleifer and Welch (1992), individuals take actions sequentially after observing the history of actions taken by the predecessors and an informative private signal. If the state of the world is changing stochastically over time during the learning process, only temporary informational cascades--situations where socially valuable information is wasted--can arise. Furthermore, no cascade ever arises when the environment changes in a sufficiently unpredictable way.
JEL Classification: D83
Suggested Citation: Suggested Citation