Rational Learning One Step Off the Path

Abstract

Which social norms are self-correcting under rational learning? We show that conduct sustained by false beliefs cannot persist if a single departure from prevailing behavior generates evidence against those beliefs. We study the overlapping-generations learning model of Fudenberg and Levine (1993), in which finitely lived Bayesian agents are repeatedly and randomly matched with agents in other player roles, observe only their own matches, and learn from experience. In simple extensive-form games with nodewise-independent, nondegenerate priors, as agents live increasingly long lives and become sufficiently patient, every limiting game outcome is path-equivalent to a subgame-confirmed equilibrium. This establishes the converse of Fudenberg and Levine (2006). The mechanism is endogenous experimentation: uncertainty about the consequences of a potentially profitable departure gives patient agents an incentive to test it, generating the observations that correct beliefs and discipline continuation play.