Extensive imitation is irrational and harmful

Eyster, Erik and Rabin, Matthew (2014) Extensive imitation is irrational and harmful. Quarterly Journal of Economics, 129 (4). 1861 - 1898. ISSN 0033-5533

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Abstract

Rationality leads people to imitate those with similar tastes but different information. But people who imitate common sources develop correlated beliefs, and rationality demands that later social learners take this correlation into account. This implies severe limits to rational imitation. We show that (i) in most natural observation structures besides the canonical single-file case, full rationality dictates that people must “anti-imitate” some of those they observe; and (ii) in every observation structure full rationality dictates that people imitate, on net, at most one person and are imitated by, on net, at most one person, over any set of interconnected players. We also show that in a very broad class of settings, any learning rule in which people regularly do imitate more than one person without anti-imitating others will lead to a positive probability of people converging to confident and wrong long-run beliefs.

Item Type:	Article
Official URL:	http://qje.oxfordjournals.org/
Additional Information:	© 2014 The Authors
Divisions:	Economics
Subjects:	H Social Sciences > HB Economic Theory
JEL classification:	B - Schools of Economic Thought and Methodology > B4 - Economic Methodology > B49 - Other
Date Deposited:	07 Aug 2014 15:37
Last Modified:	14 Sep 2024 06:35
URI:	http://eprints.lse.ac.uk/id/eprint/58763

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