A multi-generational social learning model: The effect of information cascade on aggregate welfare

For the past decades, people combine both environmental learnings (observations) and social learnings (intercommunication links) in their decision process. People in the communities face limitations or conditions which have effects on their decisions. In this paper, we present a multigenerational social learning model to analyse a world with some limitations. Then we turn the world to a free world and people try to find correct decisions utilizing these changes. In the presented model, people make their initial decisions based on sequential decision model which leads them into the herd behavior. Then we change the world so that making connections with other communities is possible. We show how aggregate welfare will be improved when people use their observations, their new obtained information on social ties and their personality factors to review their current decisions. We also have a parameter in our model that examines the effect of personality factor value on the percentage of the correct decision among the communities. Our main results show when people use their obtained information rather than sticking to the herd behavior, the aggregate welfare will be better in the world, even if people use only their own observations.