Social networks allow us to both learn about the world and learn about others. Networks can therefore promote technological progress and consumer choice on the one hand, and are sources of trust in communities on the other hand. Our goal is to decompose the channels through which both of these phenomena operate. The PIs conduct two large field experiments with about 2,500 students at Harvard University. In the first study, they will provide samples of new and complex products such as PDA's to a randomly selected group of students. They will use various treatments including print and online advertising to obtain valid instruments for estimating interaction channels. By measuring both initial and final valuations as well as subjects' knowledge about the functionality of each product the research design can separate social learning, whether it be learning from information (strong social learning) or learning from observing friends' valuations (weak social learning), from social influence which changes preferences directly.
In the second learning project the PIs will generate private signals about the quality of four imaginary companies and then observe how subjects aggregate this information in the social network. By using the same subject pool we can further refine our model of social learning.
The last part of this project is a study of trust that will use field experiment techniques in Peru. We measure trust through a new microfinance program where borrowers can obtain low-interest rate loans by finding a sponsor from a predetermined set group of people in the community who are willing to cosign the loan.
This research will help us to better understand how people learn from the experiences of others. The research design will allow the PIs to break this kind of "social learning" into two different pieces by measuring both outcomes and information transmission. A better understanding of the channels of social learning can help policy makers design more effective interventions such as encouraging contributions to retirement savings plans.
