Working Papers,
Vienna University of Economics and Business Research Group: Growth and Employment in Europe: Sustainability and Competitiveness

Abstract: We examine a model of social learning in networks following the lines of Bala and Goyal (1998, 2001). As a model of agents’ behaviour we have chosen the model of informational cascades of Bikhchandani et al (1992). Similarly to Bala and Goyal we find that the higher the ’degree of integration’ within the society is, the more likely it is that conformity of actions will arise. However, unlike their results our model suggests that in the presence of informational externalities globalisation of informational flows, expressed in the increasing density of communication channels in a network, may drive down the expected social welfare.

Keywords: Social learning, Cascades, Globalization, Networks

JEL-codes: D83; O33; F02 June 2004

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