In a Herd? Herding with costly observation and an unknown number of predecessors
AbstractWe consider a sequential decision to adopt/not adopt a technology in a herding environment with costly observation. The novelty compared to the previous models on herding with costly observation, such as Kultti and Miettinen (2006a), is that the agents do not know how many other agents have been in the same situation earlier. It turns out that herding no longer arises deterministically. We show that when observation costs are low there exists a unique symmetric pure strategy equilibrium where all agents observe the actions of two immediate predecessors in order to find out whether they are in a herd or not.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Finnish Economic Association in its journal Finnish Economic Papers.
Volume (Year): 21 (2008)
Issue (Month): 2 (Autumn)
Find related papers by JEL classification:
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Kultti Klaus K & Miettinen Paavo A, 2007. "Herding with Costly Observation," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 7(1), pages 1-16, July.
- Sushil Bikhchandani & David Hirshleifer & Ivo Welch, 2010.
"A theory of Fads, Fashion, Custom and cultural change as informational Cascades,"
Levine's Working Paper Archive
1193, David K. Levine.
- Bikhchandani, Sushil & Hirshleifer, David & Welch, Ivo, 1992. "A Theory of Fads, Fashion, Custom, and Cultural Change in Informational Cascades," Journal of Political Economy, University of Chicago Press, vol. 100(5), pages 992-1026, October.
- Banerjee, Abhijit V, 1992. "A Simple Model of Herd Behavior," The Quarterly Journal of Economics, MIT Press, vol. 107(3), pages 797-817, August.
- Klaus Kultti & Paavo Miettinen, 2006. "Herding With Costly Information," International Game Theory Review (IGTR), World Scientific Publishing Co. Pte. Ltd., vol. 8(01), pages 21-31.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Editorial Secretary).
If references are entirely missing, you can add them using this form.