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Herding with collective preferences

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  • S. Ali

    ()

  • Navin Kartik

    ()

Abstract

This paper studies a simple model of observational learning where agents care not only about the information of others but also about their actions. We show that despite complex strategic considerations that arise from forward-looking incentives, herd behavior can arise in equilibrium. The model encompasses applications such as sequential elections, public good contributions, and leadership charitable giving. Copyright Springer-Verlag 2012

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File URL: http://hdl.handle.net/10.1007/s00199-011-0609-7
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Bibliographic Info

Article provided by Springer in its journal Economic Theory.

Volume (Year): 51 (2012)
Issue (Month): 3 (November)
Pages: 601-626

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Handle: RePEc:spr:joecth:v:51:y:2012:i:3:p:601-626

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Related research

Keywords: Social learning; Observational learning; Herd behavior; Payoff interdependence; Sequential voting; Momentum; D7; D8;

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References

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  1. Timothy Feddersen & Wolfgang Pesendorfer, 1997. "Voting Behavior and Information Aggregation in Elections With Private Information," Levine's Working Paper Archive 1560, David K. Levine.
  2. John A. List & David Lucking-Reiley, 2002. "The Effects of Seed Money and Refunds on Charitable Giving: Experimental Evidence from a University Capital Campaign," Journal of Political Economy, University of Chicago Press, vol. 110(1), pages 215-233, February.
  3. David M Kreps & Robert Wilson, 2003. "Sequential Equilibria," Levine's Working Paper Archive 618897000000000813, David K. Levine.
  4. Zvika NEEMAN & Gerhard O. OROSEL, 1997. "Herding and the Winner's Curse in Markets with Sequential Bids," Vienna Economics Papers vie9711, University of Vienna, Department of Economics.
  5. Lones Smith & Peter Sorensen, 2000. "Pathological Outcomes of Observational Learning," Econometrica, Econometric Society, vol. 68(2), pages 371-398, March.
  6. 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.
  7. Sourav Bhattacharya, 2006. "Preference Monotonicity and Information Aggregation in Elections," Working Papers 325, University of Pittsburgh, Department of Economics, revised Dec 2008.
  8. Drew Fudenberg & Jean Tirole, 1991. "Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061414, December.
  9. Steven Callander, 2007. "Bandwagons and Momentum in Sequential Voting," Review of Economic Studies, Oxford University Press, vol. 74(3), pages 653-684.
  10. Ronny Razin, 2003. "Signaling and Election Motivations in a Voting Model with Common Values and Responsive Candidates," Econometrica, Econometric Society, vol. 71(4), pages 1083-1119, 07.
  11. Choi, J.P., 1994. "Herd behavior, the "Penguin effect", and the suppression of informational diffusion: An analysis of informational externalities and payoff interdependency," Discussion Paper 1994-62, Tilburg University, Center for Economic Research.
  12. Brian Knight & Nathan Schiff, 2010. "Momentum and Social Learning in Presidential Primaries," Journal of Political Economy, University of Chicago Press, vol. 118(6), pages 1110 - 1150.
  13. Andreoni,J., 2002. "Leadership giving in charitable fund-raising," Working papers 13, Wisconsin Madison - Social Systems.
  14. Goeree, Jacob & Palfrey, Thomas & Rogers, Brian, 2003. "Social learning with private and common values," Working Papers 1187, California Institute of Technology, Division of the Humanities and Social Sciences.
  15. Banerjee, Abhijit V, 1992. "A Simple Model of Herd Behavior," The Quarterly Journal of Economics, MIT Press, vol. 107(3), pages 797-817, August.
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Cited by:
  1. Volker Hahn, 2010. "Sequential Aggregation of Verifiable Information," CER-ETH Economics working paper series 10/136, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
  2. Patrick Hummel & Brian Knight, 2012. "Sequential or Simultaneous Elections? A Welfare Analysis," NBER Working Papers 18076, National Bureau of Economic Research, Inc.
  3. Hummel, Patrick & Holden, Richard, 2014. "Optimal primaries," Journal of Public Economics, Elsevier, vol. 109(C), pages 64-75.
  4. Erik Eyster & Andrea Galeotti & Navin Kartik & Matthew Rabin, 2012. "Congested Observational Learning," Economics Discussion Papers 706, University of Essex, Department of Economics.

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