zbMATH — the first resource for mathematics

Word-of-mouth learning. (English) Zbl 1069.91017
Summary: This paper analyzes a model of rational word-of-mouth learning, in which successive generations of agents make once-and-for-all choices between two alternatives. Before making a decision, each new agent samples \(N\) old ones and asks them which choice they used and how satisfied they were with it. If (a) the sampling rule is “unbiased” in the sense that the samples are representative of the overall population, (b) each player samples two or more others, and (c) there is any information at all in the payoff observations, then in the long run every agent will choose the same thing. If in addition the payoff observation is sufficiently informative, the long-run outcome is efficient. We also investigate a range of biased sampling rules, such as those that over-represent popular or successful choices, and determine which ones favor global convergence towards efficiency.

91A26 Rationality and learning in game theory
91E40 Memory and learning in psychology
Full Text: DOI
[1] Bala, V.; Goyal, S., Learning from neighbours, Rev. econ. stud., 65, 595-621, (1998) · Zbl 0910.90103
[2] Banerjee, A., The economics of rumours, Rev. econ. stud., 19, 309-327, (1993) · Zbl 0775.90094
[3] Banerjee, A., A simple model of herd behavior, Quart. J. econ., 107, 797-817, (1992)
[4] Bhikchandani, S.; Hirshleifer, D.; Welch, I., A theory of fads, fashion, custom, and informational cascades, J. polit. econ., 100, 992-1026, (1992)
[5] Bjonerstedt, J.; Weibull, J., Nash equilibrium and evolution by imitation, ()
[6] Caplin, A.; Leahy, J., Business as usual, market crashes, and wisdom after the fact, Amer. econ. rev., 84, 548-565, (1994)
[7] Chamley, C.; Gale, D., Information revelation and strategic delay in a model of investment, Econometrica, 62, 1065-1086, (1994) · Zbl 0813.90144
[8] Duflo, E., Saez, E., 2000. Participation and investment decisions in a retirement plan: the influence of colleagues choices. Mimeo. MIT
[9] Ellison, G.; Fudenberg, D., Rules of thumb for social learning, J. polit. econ., 101, 612-643, (1993)
[10] Ellison, G.; Fudenberg, D., Word-of mouth communication and social learning, Quart. J. econ., 110, 95-126, (1995) · Zbl 0827.90039
[11] Hofbauer, J., Schlag, K., 1998. Sophisticated imitation in cyclic games. DP B-427. University of Bonn
[12] Lee, I., On the convergence of informational cascades, J. econ. theory, 61, 395-411, (1993) · Zbl 0796.90012
[13] McKenna, R., Relationship marketing: successful strategies for the age of the customer, (1991), Addison-Wesley Reading, MA
[14] Moore, G., Crossing the chasm: marketing in high-tech industries, (1991), Harper Collins New York
[15] Munshi, K., Myaux, J., 2000. Social norms, with an application of demographic transition in Bangladesh. Mimeo. University of Pennsylvania
[16] Schlag, K., Why imitate and if so, how? A boundedly rational approach to multi-armed bandits, J. econ. theory, 78, 130-156, (1998) · Zbl 0895.90003
[17] Smith, L.; Sorenson, P., Pathological models of observational learning, Econometrica, 68, 371-398, (2000) · Zbl 1023.91510
[18] Udry, C.; Conley, T., Social learning through networks: the adoption of new agricultural technologies in ghana, Amer. J. agricultural econ., 83, 3, 668-673, (2001)
[19] Vives, X., Learning from a welfare analysis, Games econ. behav., 20, 177-200, (1997) · Zbl 0894.90037
This reference list is based on information provided by the publisher or from digital mathematics libraries. Its items are heuristically matched to zbMATH identifiers and may contain data conversion errors. It attempts to reflect the references listed in the original paper as accurately as possible without claiming the completeness or perfect precision of the matching.