Three Minds Equal Manjushari's Wisdom: An Anatomy of Informal Social Learning with Heterogenous Agents by the Hierarchical Bayesian Approach

We learn from all sorts of informal social learning devices, which convey information only inaccurately. Despite this, however, a case supporting a positive contribution of such a device has not been captured in the existing empirical literature. This study builds a discrete choice model of consumption in which informal social learning takes place in a Beta-Bernoulli process of information update. The model is estimated by the Bayesian statistical method with Markov chain Monte Carlo simulation. It provides evidence supporting the positive role of an informal device, to which individual heterogeneity and the effacing of bad news contribute.