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2003): “The Advice Puzzle: An Experimental Study of Social Learning Where Words Speak Louder Than Actions,” mimeo

By Shachar Kariv and Andrew Schotter

Abstract

This paper studies how individuals learn by observing the behavior of predecessors as well as from their advice. What we find is a truly puzzling result that we call the advice paradox. This paradox can be stated as follows: subjects in a laboratory social learning situation played with and without advice appear to be more willing to follow the advice given to them by their predecessor than to copy their action, despite the fact that both pieces of information are equally informative in equilibrium. The consequence of this advice paradox is that in experiments with advice subjects tend to herd more than they do in experiments where they can only view their predecessor’s action. Remarkably, these herds tend to select the correct action and, hence, advice tends to be efficiency increasing when compared to experiments where subjects can only observe their predecessor’s action

Topics: Social Learning, Informational Cascades, Herd Behavior, Advice, Experiment
Year: 2014
OAI identifier: oai:CiteSeerX.psu:10.1.1.415.3911
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