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SOCIAL LEARNING ABOUT CONSUMPTION

Published online by Cambridge University Press:  28 September 2015

Isabelle Salle  and
Pascal Seppecher
Isabelle Salle*
Affiliation:
University of Amsterdam and Tinbergen Institute
Pascal Seppecher
Affiliation:
University of Paris 13 and University of Nice Sophia Antipolis
*
Address correspondence to: Isabelle Salle, CeNDEF, Amsterdam School of Economics, University of Amsterdam, Roetersstraat 11, NL-1018 WB, Amsterdam, the Netherlands; e-mail: I.L.Salle@uva.nl.
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Abstract

This paper applies a social learning model to the optimal consumption rule of Allen and Carroll [Macroeconomic Dynamics 5(2001), 255–271] and delivers convincing convergence dynamics toward the optimal rule. These findings constitute a significant improvement over previous results in the literature, in terms of both speed of convergence and parsimony of the learning model. The learning model exhibits several appealing features: it is frugal, is easy to apply to a various range of learning objectives, and requires few procedures and little information. Particular care is given to behavioral interpretation of the modeling assumptions in light of evidence from the fields of psychology and social science. Our results highlight the need to depart from the genetic metaphor, and account for intentional decision-making, based on agents' relative performances. By contrast, we show that convergence is strongly hindered by exact imitation processes, or random exploration mechanisms, which are usually assumed when modeling social learning behavior. Our results suggest a method for modeling bounded rationality, which could be interestingly tested in a wide range of economic models with adaptive dynamics.

Keywords

LearningBounded RationalityEvolutionary AlgorithmsConsumption Rule

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Type
Articles
Information
Macroeconomic Dynamics , Volume 20 , Issue 7 , October 2016 , pp. 1795 - 1825
Copyright
Copyright © Cambridge University Press 2015 

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