Eyster, Erik (London School of Economics and Political Science)
Rabin, Matthew (Harvard University)
Weizsäcker, Georg (HU Berlin)
We investigate experimentally whether social learners appreciate the redundancy of information conveyed by their observed predecessors’ actions. Each participant observes a private signal and enters an estimate of the sum of all earlier-moving participants’ signals plus her own. In a first treatment, participants move single-file and observe all predecessors’ entries; Bayesian Nash Equilibrium (BNE) predicts that each participant simply add her signal to her immediate predecessor’s entry. Although 75% of participants do so, redundancy neglect by the other 25% generates excess imitation and mild inefficiencies. In a second treatment, participants move four per period; BNE predicts that most players anti-imitate some observed entries. Such anti-imitation occurs in 35% of the most transparent cases, and 16% overall. The remaining redundancy neglect creates dramatic excess imitation and inefficiencies: late-period entries are far too extreme, and on average participants would earn substantially more by ignoring their predecessors altogether.
social learning; redundancy neglect; experiments; higher-order beliefs