TY - JOUR
T1 - Learning from private and public observations of others' actions
AU - Amador, Manuel
AU - Weill, Pierre Olivier
PY - 2012/5/1
Y1 - 2012/5/1
N2 - We study the diffusion of dispersed private information in a large economy, where agents learn from the actions of others through two channels: a public channel, such as equilibrium market prices, and a private channel, for example local interactions. We show that, when agents learn only from the public channel, an initial release of public information increases agents' total knowledge at all times and increases welfare. When a private learning channel is present, this result is reversed: more initial public information reduces agents asymptotic knowledge by an amount in order of log(t) units of precision. When agents are sufficiently patient, this reduces welfare.
AB - We study the diffusion of dispersed private information in a large economy, where agents learn from the actions of others through two channels: a public channel, such as equilibrium market prices, and a private channel, for example local interactions. We show that, when agents learn only from the public channel, an initial release of public information increases agents' total knowledge at all times and increases welfare. When a private learning channel is present, this result is reversed: more initial public information reduces agents asymptotic knowledge by an amount in order of log(t) units of precision. When agents are sufficiently patient, this reduces welfare.
KW - Information aggregation
KW - Learning
KW - Value of information
UR - http://www.scopus.com/inward/record.url?scp=84859441088&partnerID=8YFLogxK
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U2 - 10.1016/j.jet.2012.02.001
DO - 10.1016/j.jet.2012.02.001
M3 - Article
AN - SCOPUS:84859441088
SN - 0022-0531
VL - 147
SP - 910
EP - 940
JO - Journal of Economic Theory
JF - Journal of Economic Theory
IS - 3
ER -