Philipp Strack, University of California Berkley

Philipp Strack, University of California Berkley

Kalai Family Workshop in Applied Microeconomics
Dec 4 2017

"Groupthink and the Failure of Information Aggregation in Large Groups"

Abstract: We study how effectively long-lived rational agents learn from repeatedly observing each others’ actions. We find that in the long run, information aggregation fails, and the fraction of private information transmitted goes to zero as the number of agents gets large. With Normal signals, in the long-run, agents learn less from observing the actions of any number of other agents than they learn from seeing three other agents’ signals. We identify rational groupthink—in which agents ignore their private signals and choose the same action for long periods of time —as the cause of this failure of information aggregation.

PDF icon Stracks' Paper.pdf

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