Template-Type: ReDIF-Paper 1.0
Title: Social Learning With State-Dependent Observations
Author-Name: Carl Heese
Author-Email: heese@uni-bonn.de

Classification-JEL: D83
Keywords: Social Learning, Confounded Learning

Abstract: In this note, I study a variant of the canonical binary-state binary-choice social learning model (Bikhchandani et al., 1992). An individual would like to choose an action only in the high state.  When making her own decision, she observes previous decision-makers who chose the action. Importantly, the likelihood of observing the action of previous decision-maker depends on the state. I show that when observing the action is more likely in the low state, the individual faces an inference problem: does she observe many actions because the state is high and previous decision-makers had private information about this or because the state is low and previous actions are more visible. In this situation, learning is confounded (Smith and Sorensen, 2011).

Note: 
Length: 5
Creation-Date: 2020-10
Revision-Date: 
File-URL: https://www.crctr224.de/research/discussion-papers/archive/dp222
File-Format: application/pdf
Handle: RePEc:bon:boncrc:CRCTR224_2020_222