Information choice in a social learning experiment

Abstract

We document heterogeneity of rationality and bias in information acquisition in a social learning experiment, where subjects, prior to guessing an unknown binary state of the world, must choose between receiving a private signal or seeing social information containing the guesses made by previous subjects in the sequence - rather than observing both pieces of information as in the classic design of Anderson and Holt (1997). By requiring subjects to make this information choice at different points in the sequence, our within-subject design allows us to separate biased from optimal information choices. Overall, the majority of subjects exhibit a suboptimal bias in favor of choosing social rather than private information, consistent with underestimating both mistakes made by other subjects and the frequency of uninformative social information. Furthermore, a substantial minority behave according to a refined equilibrium prediction, while some subjects consistently choose social information and others consistently choose private information