Theory seminar presented by Aislinn Bohren (CMU)

Abstract :This paper explores learning in a setting with social perception biases. Individuals learn from others’ outcomes but have a misspecified model of their preferences. When individuals systematically overestimate the similarity between their own preferences and the preferences of others — exhibiting the false consensus effect — this can lead to incorrect learning, while when individuals systematically underestimate this similarity — exhibiting pluralistic ignorance — this can prevent beliefs from converging. We explore how information campaigns — releasing (costly) information about the state — can counteract these inefficient choices. We show that the duration — temporary or permanent — and the target — correct inefficient action choices or reinforce efficient action choices — of the optimal information campaign depend crucially on the form of misspecification.