Information Choice in a Social Learning Experiment

Abstract We document heterogeneity of rationality and bias in information acquisition in a social learning experiment, where subjects, prior to guessing an unknown binary state of the world, must choose between receiving a private signal or seeing social information containing the guesses made by previous subjects in the sequence - rather than observing both pieces of information as in the classic design of Anderson and Holt (1997) . By requiring subjects to make this information choice at different points in the sequence, our within-subject design allows us to separate biased from optimal information choices. Overall, the majority of subjects exhibit a suboptimal bias in favor of choosing social rather than private information, consistent with underestimating both mistakes made by other subjects and the frequency of uninformative social information. Furthermore, a substantial minority behave according to a refined equilibrium prediction, while some subjects consistently choose social information and others consistently choose private information.