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  5. Information Cascades and Social Learning

Information Cascades and Social Learning

  • Sushil Bikhchandani
  • David Hirshleifer
  • Omer Tamuz
  • Ivo Welch
Journal of Economic Literature (Forthcoming)

Abstract

Social learning is the updating of beliefs based on observation of others. Such observation can lead to efficient aggregation of information, but also to inaccurate decisions, fragility of mass behaviors, and, in the case of information cascades, to complete blockage of learning. We review the theory of information cascades and social learning, and discuss important themes, insights and applications of this literature as it has developed over the last thirty years. We also highlight open questions and promising directions for further theoretical and empirical exploration.

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