Behavioral Social Learning

We revisit the economic models of social learning by assuming that individuals update theirbeliefs in a non-Bayesian way. Individuals either overweigh or underweigh (in Bayesian terms)their private information relative to the public information revealed by the decisions of othersand each individual’s updating rule is private information. First, we consider a setting withperfectly rational individuals with a commonly known distribution of updating rules. Weshow that introducing heterogeneous updating rules in a simple social learning environmentreconciles equilibrium predictions with laboratory evidence. Additionally, a model of sociallearning with bounded private beliefs and sufficiently rich updating rules corresponds to amodel of social learning with unbounded private beliefs.[...]