Economic Theory

, Volume 31, Issue 3, pp 523–538

Learning Dynamics with Private and Public Signals

Authors

    • US Department of Commerce, Bureau of Economic AnalysisOffice of the Chief Statistician BE-40
Research Article

DOI: 10.1007/s00199-006-0103-9

Cite this article as:
Copeland, A. Economic Theory (2007) 31: 523. doi:10.1007/s00199-006-0103-9

Abstract

This paper studies the dynamics of learning in a model of technology adoption. Firms learn about an unknown technology by observing both private and public signals. Because of the externality associated with the public signal, the social planner has firms experiment more in the initial period of the model, relative to the market equilibrium. In certain cases, this more rapid generation of information results in the planner experimenting less in later periods of the model. In contrast, typical models with public signals result in the planner inducing more experimentation in all periods of the model relative to the market equilibrium.

Keywords

Social learningTwo-armed banditsFree-rider problemInformational public good

JEL Classification Numbers

D62D81D83

Copyright information

© Springer-Verlag 2006