Journal of Economic Literature Vol. 62 No. 3 2024

Information Cascades and Social Learning

Sushil Bikhchandani¹; David Hirshleifer²; Omer Tamuz³; Ivo Welch¹

¹ Anderson School of Management University of California Los Angeles · ² Marshall School of Business, University of Southern California and NBER. · ³ Division of the Humanities and Social Sciences, Caltech

Abstract

Social learning is the updating of beliefs based on observation of others. Such observation can lead to efficient aggregation of information, but also to inaccurate decisions, fragility of mass behaviors, and, in the case of information cascades, to complete blockage of learning. We review the theory of information cascades and social learning and discuss important themes, insights, and applications of this literature as it has developed over the last 30 years. We also highlight open questions and promising directions for further theoretical and empirical exploration.

DOI

10.1257/jel.20241472

Volume

62

Issue

3

Pages

1040-1093

Language

en

Sources

bibtex:phds-export.bib openalex crossref

Cite

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