Research Article

Economic Theory

, Volume 31, Issue 3, pp 523-538

First online:

Learning Dynamics with Private and Public Signals

  • Adam CopelandAffiliated withUS Department of Commerce, Bureau of Economic Analysis, Office of the Chief Statistician BE-40 Email author 

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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.


Social learning Two-armed bandits Free-rider problem Informational public good

JEL Classification Numbers

D62 D81 D83