Information choice in a social learning experiment

Abstract

We document heterogeneity of rationality and bias in information acquisition in a social learning experiment, where subjects, prior to guessing an unknown binary state of the world, must choose between receiving a private signal or seeing social information containing the guesses made by previous subjects in the sequencerather than observing both pieces of information as in the classic design of Anderson and Holt (1997). By requiring subjects to make this information choice at different points in the sequence, our within-subject design allows us to separate biased from optimal information choices. Overall, the majority of subjects exhibit a suboptimal bias in favor of choosing social rather than private information, consistent with underestimating both mistakes made by other subjects and the frequency of uninformative social information. Furthermore, a substantial minority behave according to a refined equilibrium prediction, while some subjects consistently choose social information and others consistently choose private information.

Social information use and social information waste

“…Social information remains discounted. It is worth noting, however, that in experiments where social information has to be actively requested, instead of being passively presented, subjects are prone to request too much social information [68,69], even when that information is worthless [70].…”

“…Only two studies, to our knowledge, address the possible effect of altruistic motivations on egocentric discounting. In Eriksson & Strimling [50], subjects who scored high on a prosocial attitudes survey (Social Value Orientation scale) showed a greater propensity to acquire individual as distinct from social information, although [69] fails to find an impact of self-reported altruistic tendencies on subjects' preferences for social or private information. A "producer-scrounger equilibrium" account may also explain the widely documented inter-individual heterogeneity in propensities for social learning [53,75,84,85] since such an equilibrium is based upon the coexistence of two opposite strategies.…”

Copy Trading

“…Scharfstein and Stein, 1990;De Long et al 1990;or Bikhchandani et al 1992). Relatedly, Goeree and Yariv (2015) and Duffy et al (2019) show in the context of social learning experiments that a sizeable fraction of subjects has a strong taste to follow others even when there is no information on performance.…”

“…it was the first time they played this game." 17 The list was ordered from highest to lowest realized payoffs, and presented in groups of 5 entries. Table 4 reports a sample of the information provided, where the last two columns were only present in treatment COPY.…”

“…Note that subjects in INFO or COPY received no information on the Block 2 decisions of the BASELINE participants before their Block 2 decisions. Copiers were subsequently informed of the asset choice, the selling period and the obtained payoffs of their chosen leader 17. Note that this design feature excluded the possibility that subjects might end up copying each other.…”