Social Learning
Often in life, we can learn from observing how others, friends as well as strangers, solve certain problems. The key logic is, of course, that we assume that others choose a particular action because they have a goo reason, too. Hence, observing how somebody else deals with a certain problem typically contains some information about what might be optimal in that problem. And since there are only very few decisions that are unique to an individual life social learning is prevalent in almost every area of human decision making.
The economics literature on social learning has developed in two branches. In the first branch, all decision makers are modelled as fully (Bayesian) rational, while in the second branch, decision makers are simply assumed to follow some reasonable heuristic. While imitation of another's choice arises endogenously in the first branch (whenever the information contained in what I observe overpowers my own information), the second branch directly assumes rules about imitative behaviour, for example, imitate somebody else whenever somebody else is more successful that you have been so far.
In my research on social learning I have followed both branches. In Guarino, Huck, and Jeitschko we experimentally investigate a model of Bayesian learning that predicts sudden violate changes in the behaviour of agents. In the laboratory these changes (information avalanches) do not take place since decision makers are prone to a "solipsism bias", i.e., they are unable to imagine that others who play the same game may make quite different experiences than they themselves. We conjecture that this solipsism bias is of relevance in many fields of human decision making. Also, following the first branch is work by Guarino, Harmgart, and Huck on aggregate information cascades that will appear here in the very near future.
Following the second branch is Apesteguia, Huck, and Oechssler. Here we study a generalized model of boundedly rational imitation that shows that for predicting long run behaviour it is more important to know whom one imitates than exactly how. These theoratical findings are also subjected to a broad experimental test that supports the predictions of the theory. Finally, we find evidence of (boundedly rational) social learning in an experimental study on trust that has some relevance on market design. In particular, Bohnet, Harmgart, Huck, and Tyran show that market designers may want to provide feedback about past quality of sold goods not only to buyers but also to sellers. This two-sided market transparency is shown to enhance market efficiency significantly.
