Does observation influence learning?

A common value auction experiment is run to compare the relative influence of observation and experience on learning. It is shown that the ex-post observation of opponents' actions and payoffs homogenizes behavior and accelerates learning toward the Nash equilibrium. Additionally, experiential, and observational learning are both relevant and of comparable magnitude. A general reinforcement model for continuous strategies, encompassing choice reinforcement learning, direction learning and payoff dependent imitation, performs well in explaining the experimental data, and it dominates competing models such as the reinforcement of best response strategies. (C) 2003 Elsevier Inc. All rights reserved.