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The right choice at the right time : a herding experiment in endogenous time
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Sgroi, Daniel (2003) The right choice at the right time : a herding experiment in endogenous time. Experimental Economics, Vol.6 (No.2). pp. 159-180. doi:10.1023/A:1025357004821 ISSN 1386-4157.
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Official URL: http://dx.doi.org/10.1023/A:1025357004821
Abstract
Herding describes the phenomenon in decision-making where an economic agent disregards his own private information to follow the actions of his predecessors as in Banerjee (1992). With later decision-makers simply copying earlier decisions their private information cannot be inferred by other decision-makers and will be forever lost. There is some experimental evidence on simple sequential herding of this type in the literature, notably Anderson and Holt (1997). This paper differs by allowing subjects to delay their decision-making in order to benefit from observing others'' actions as in more recent herding models such as Chamley and Gale (1994). The results in this paper suggest that subjects will indeed delay when their private information is not sufficiently strong. Despite this ability to wait, as predicted in the theoretical literature, cascades remained ubiquitous and more worrying still, reverse-cascades occurred in which incorrect decisions made by early decision-makers produced informational cascades on the wrong action. In an alternative design, informing subjects that they had made incorrect choices only made matters worse as subjects moved further away from rational behavior.
Item Type: | Journal Article | ||||
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Subjects: | B Philosophy. Psychology. Religion > BF Psychology H Social Sciences > HB Economic Theory |
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Divisions: | Faculty of Social Sciences > Economics | ||||
Library of Congress Subject Headings (LCSH): | Collective behavior -- Mathematical models, Information behavior -- Mathematical models | ||||
Journal or Publication Title: | Experimental Economics | ||||
Publisher: | Springer | ||||
ISSN: | 1386-4157 | ||||
Official Date: | 2003 | ||||
Dates: |
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Volume: | Vol.6 | ||||
Number: | No.2 | ||||
Page Range: | pp. 159-180 | ||||
DOI: | 10.1023/A:1025357004821 | ||||
Status: | Peer Reviewed | ||||
Publication Status: | Published | ||||
Access rights to Published version: | Restricted or Subscription Access | ||||
Date of first compliant deposit: | 22 December 2015 | ||||
Date of first compliant Open Access: | 22 December 2015 | ||||
Funder: | Economic and Social Research Council (Great Britain) (ESRC), Nuffield College |
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