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Imitation in heterogeneous populations

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We study a boundedly rational model of imitation when payoff distributions of actions differ across types of individuals. Individuals observe others’ actions and payoffs, and a comparison signal. One of two inefficiencies always arises: (i) uniform adoption, i.e., all individuals choose the action t...

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Bibliographic Details
Main Authors: Hedlund, Jonas (Author) , Oyarzun, Carlos (Author)
Format: Book/Monograph Working Paper
Language:English
Published: Heidelberg University of Heidelberg, Department of Economics August 5, 2016
Series:Discussion paper series / University of Heidelberg, Department of Economics no. 625
In: Discussion paper series (no. 625)

DOI:10.11588/heidok.00022241
Subjects:
Arbeitspapier
Graue Literatur
Online Access:Resolving-System, kostenfrei, Volltext: http://nbn-resolving.de/urn:nbn:de:bsz:16-heidok-222416
Resolving-System, kostenfrei, Volltext: http://hdl.handle.net/10419/162968
Resolving-System, kostenfrei, Volltext: https://doi.org/10.11588/heidok.00022241
Verlag, kostenfrei, Volltext: http://www.ub.uni-heidelberg.de/archiv/22241
Verlag, kostenfrei, Volltext: http://archiv.ub.uni-heidelberg.de/volltextserver/22241/1/hedlund_oyarzun_2016_dp625.pdf
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Author Notes:Jonas Hedlund and Carlos Oyarzun
Description
Summary:We study a boundedly rational model of imitation when payoff distributions of actions differ across types of individuals. Individuals observe others’ actions and payoffs, and a comparison signal. One of two inefficiencies always arises: (i) uniform adoption, i.e., all individuals choose the action that is optimal for one type but sub-optimal for the other, or (ii) dual incomplete learning, i.e., only a fraction of each type chooses its optimal action. Which one occurs depends on the composition of the population and how critical the choice is for different types of individuals. In an application, we show that a monopolist serving a population of boundedly rational consumers cannot fully extract the surplus of high-valuation consumers, but can sell to consumers who do not value the good.
Physical Description:Online Resource
DOI:10.11588/heidok.00022241

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