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American Economic Review: Vol. 103 No. 6 (October 2013)

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Do We Follow Others When We Should? A Simple Test of Rational Expectations: Comment

Article Citation

Ziegelmeyer, Anthony, Christoph March, and Sebastian Krügel. 2013. "Do We Follow Others When We Should? A Simple Test of Rational Expectations: Comment." American Economic Review, 103(6): 2633-42.

DOI: 10.1257/aer.103.6.2633

Abstract

The payoff of actions is estimated and the resulting empirical payoff is controlled for in regression analyses to formulate a test of rational expectations in information cascade experiments. We show that the empirical payoff of actions is a function of estimates of choice probabilities and estimates of the information parameters of the game. We introduce an alternative empirical payoff of actions with true values of the information parameters. Our improved measure of the success of social learning confirms that rational expectations are violated, but deviations from rational expectations are statistically significantly smaller than in Weizsacher (2010).

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Authors

Ziegelmeyer, Anthony (Queen's U Belfast)
March, Christoph (Technical U Munich U)
Krügel, Sebastian (Max Planck Institute of Economics, Jena and International Max Planck Research School, Munich)

JEL Classifications

D82: Asymmetric and Private Information; Mechanism Design
D83: Search; Learning; Information and Knowledge; Communication; Belief
D84: Expectations; Speculations


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