Conformism and diversity under social learning

V. Bala, and S. Goyal
Economic Theory 17, 101-120, 2001.

When there are competing technologies or products with unknown payoffs which are adopted over time within a society, an important question is whether conformism or diversity will prevail. We use a learning model with local interactions to study this question. We show that the structure of information flows within a society helps to determine whether conformism or diversity obtains. We find that if information is public then society conforms to a single technology in the long run. On the other hand, if society consists of smaller groups of individuals and interaction within groups is more intense as compared to interaction across the groups, then two technologies can coexist and diversity obtains, in the long run. Our analysis involves a novel application of the Law of the Iterated Logarithm.

This paper in Economic Theory

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