Economic Theory - Wanying (Kate) Huang (Caltech)

Title: Learning from Unreliable Information

Abstract: We study whether individuals can learn the reliability of their information source through social learning. We revisit the classic sequential social learning model, where agents arrive in order and make decisions based on the past actions of others and their private signals. However, the reliability of the common signal-generating process remains uncertain. We show that the achievement of learning in this setting is not guaranteed, and it depends crucially on the relative tail distributions between the uninformative and informative signals. We identify the phenomenon of perpetual disagreement as the cause of learning and provide a characterization of learning in the canonical Gaussian environment.