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Cultural Transmission with Incomplete Information

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Document pages: 54 pages

Abstract: This paper introduces incomplete information into the standard cultural transmission framework (Bisin and Verdier, 2001). We assume that through the interaction with their offspring, parents receive feedback about the outcome of the socialization process, but are not able to disentangle the impact of the efficiency of their own transmission technology from that of their own group share within the society. In equilibrium, conjectures must be compatible with the information received and multiple equilibria may arise. Parents overestimate their own efficiency if and only if they underestimate the share of their own group. Interestingly, we show that, under incomplete information, there exist equilibria in which, the smaller the minority, the lower its effort relative to the majority. We also characterize the welfare loss induced by incomplete information. Finally, considering population dynamics, we show that depending on the distribution of conjectures about population shares and selection rules, both globally stable cultural homogeneity and stable or unstable cultural heterogeneity can emerge in the long run. We conclude by discussing the case in which conjectures about population shares are shaped by cultural leaders.

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