Do We Follow Others When We Should? A Simple Test of Rational Expectations

S-Tier
Journal: American Economic Review
Year: 2010
Volume: 100
Issue: 5
Pages: 2340-60

Score contribution per author:

8.043 = (α=2.01 / 1 authors) × 4.0x S-tier

α: calibrated so average coauthorship-adjusted count equals average raw count

Abstract

The paper presents a meta dataset covering 13 experiments on social learning games. It is found that in situations where it is empirically optimal to follow others and contradict one's own information, the players err in the majority of cases, forgoing substantial parts of earnings. The average player contradicts her own signal only if the empirical odds ratio of the own signal being wrong, conditional on all available information, is larger than 2:1, rather than 1:1 as would be implied by rational expectations. A regression analysis formulates a straightforward test of rational expectations which strongly rejects the null. (JEL D82, D83, D84)

Technical Details

RePEc Handle
repec:aea:aecrev:v:100:y:2010:i:5:p:2340-60
Journal Field
General
Author Count
1
Added to Database
2026-01-29