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Updating ambiguous beliefs in a social learning experiment

Authors: Roberta De Filippis , Antonio Guarino , Philippe Jehiel and Toru Kitagawa
Date: 24 March 2017
Type: cemmap Working Paper, CWP13/17
DOI: 10.1920/wp.cem.2017.1317

Abstract

We present a social learning experiment in which subjects predict the value of a good in sequence. We elicit each subject’s belief twice: first (“first belief”), after he observes his predecessors’ prediction; second, after he also observes a private signal. Our main result is that subjects update on their signal asymmetrically. They weigh the private signal as a Bayesian agent when it confirms their first belief and overweight it when it contradicts their first belief. This way of updating, incompatible with Bayesianism, can be explained by ambiguous beliefs (multiple priors on the predecessor’s rationality) and a generalization of the Maximum Likelihood Updating rule. Our experiment allows for a better understanding of the overweighting of private information documented in previous studies.

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Previous version:
Roberta De Filippis, Antonio Guarino, Philippe Jehiel and Toru Kitagawa May 2016, Updating ambiguous beliefs in a social learning experiment, cemmap Working Paper, CWP18/16, IFS

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