Overabundant Information and Learning Traps

Abstract: We develop a model of social learning from overabundant information: Short-lived agents sequentially choose from a large set of (flexibly correlated) information sources for prediction of an unknown state. Signal realizations are public. We demonstrate two starkly different long-run outcomes: (1) efficient information aggregation, where the community eventually learns as fast as possible; (2) "learning traps," where the community gets stuck observing suboptimal sources and learns inefficiently. Our main results identify a simple property of the signal correlation structure that separates these outcomes. In both regimes, we characterize which sources are observed in the long run and how often.