Individual vs. Social Learning: An Experiment

Abstract

We study the effectiveness of social learning when subjects can also learn individually. In the baseline treatment, a subject observes a sequence of private signals about an unknown state of the world and chooses an action to match the state. In the unilateral social learning treatment, a subject observes the lagged actions of another subject in the baseline condition in addition to her own private signals. In the bilateral treatment, two subjects observe each other's lagged actions in addition to their own signals. While beliefs and decisions become more accurate over time, social learning fails in the sense that accuracy is not improved by observing another subject's actions. The median subject extracts 1.6% of the available information from her partner's action in the bilateral treatment and about 20% of the available information in the unilateral treatment. We also find evidence of correlation neglect: subjects in the bilateral treatment treat the actions of others as if they do not depend on their own past histories.