Too Costly To Follow Blindly: Endogenous Learning and Herding

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Private learning is modeled 脿 la rational inattention literature. I find a non-monotone relationship between social and private learning. They are substitutes when private learning is sufficiently cheap and become complement for higher private learning costs and eventually becomes uninformative. This happens because an increase in private learning costs makes social learning less informative. As an implication, only the reduction of the cost of private learning unambiguously increases welfare contrary to the herding result, where restricting social learning initially is optimal.</p> </section> <footer class="page__meta"> <p class="page__taxonomy"> <strong><i class="fas fa-fw fa-tags" aria-hidden="true"></i> Tags: </strong> <span itemprop="keywords"> <a href="/tags/#d82" class="page__taxonomy-item p-category" rel="tag">D82</a><span class="sep">, </span> <a href="/tags/#d83" class="page__taxonomy-item p-category" rel="tag">D83</a><span class="sep">, </span> <a href="/tags/#d89" class="page__taxonomy-item p-category" rel="tag">D89</a><span class="sep">, </span> <a href="/tags/#herding" class="page__taxonomy-item p-category" rel="tag">Herding</a><span class="sep">, </span> <a href="/tags/#rational-inattention" class="page__taxonomy-item p-category" rel="tag">Rational inattention</a><span class="sep">, </span> <a href="/tags/#social-learning" class="page__taxonomy-item p-category" rel="tag">Social learning</a> </span> </p> <p class="page__taxonomy"> <strong><i class="fas fa-fw fa-folder-open" aria-hidden="true"></i> Categories: </strong> <span itemprop="keywords"> <a href="/categories/#microeconomics" class="page__taxonomy-item p-category" rel="tag">Microeconomics</a> </span> </p> <p class="page__date"><strong><i class="fas fa-fw fa-calendar-alt" aria-hidden="true"></i> Updated:</strong> <time class="dt-published" datetime="2021-02-04T00:00:00+00:00">February 4, 2021</time></p> </footer> <section class="page__share"> <a href="https://twitter.com/intent/tweet?text=Too+Costly+To+Follow+Blindly%3A+Endogenous+Learning+and+Herding%20https%3A%2F%2Fseri.network%2F2021%2F02%2Ftoo-costly-to-follow-blindly-endogenous-learning-and-herding%2F" class="btn btn--twitter" onclick="window.open(this.href, 'window', 'left=20,top=20,width=500,height=500,toolbar=1,resizable=0'); 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Too Costly To Follow Blindly: Endogenous Learning and Herding - SERI