Learning by doing, a change in beliefs due to experience, is crucial to the adaptive behaviours of organizations as well as the individuals that inhabit them. In this review paper, we summarise different pathologies of learning noted in past literature using a common underlying mechanism based on self-confirming biased beliefs. These are inaccurate beliefs about the environment that are self-confirming because acting upon these beliefs prevents their falsification. We provide a formal definition for self-confirming biased beliefs as an attractor that (...) can lock learning by doing systems into suboptimal actions and provide illustrations based on simulations. We then compare and distinguish self-confirming biased beliefs from other related theoretical constructs, including confirmation bias, self-fulfilling prophecies, and sticking points, and underscore that self-confirming biased beliefs underlie inefficient self-confirming equilibria and hot-stove effects. Lastly, we highlight two fundamental ways to escape self-confirming biased beliefs: taking actions inconsistent with beliefs and getting information on unchosen actions. (shrink)

The social environment influences what information individuals sample: people are often exposed to alternatives that are popular. This can systematically change an individual's evaluation of an alternative if she had previously been avoiding it due to a negative evaluation. The authors show that social exposure can have positive or negative effects on evaluation, depending on how popularity and prior evaluations interact. This theory was supported by a large‐scale analysis of data from a hotel chain.