Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/162968
Authors: 
Hedlund, Jonas
Oyarzun, Carlos
Year of Publication: 
2016
Series/Report no.: 
Discussion Paper Series, University of Heidelberg, Department of Economics 625
Abstract: 
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.
Subjects: 
Imitation
heterogeneous populations
bounded rationality
Fubini extension
JEL: 
D81
D83
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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