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A simple note on Herd Behaviour

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  • Andrea Morone

    ()
    (University of Bari)

  • Eleni Samanidou

    ()
    (University of Kiel)

Abstract

In his "Simple model of herd behaviour", Banerjee (1992) shows that - in a sequential game - if the first two players have chosen the same action, player 3 and all subsequent players will ignore his/her own information and start a herd, an irreversible one. In this paper we analyse the role played by the tie-breaking assumptions in reaching the equilibrium. We showed that: players' strategies are parameter dependent; an incorrect herd could be reversed; a correct herd is irreversible.

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File URL: http://www.dse.uniba.it/Quaderni/SERIES/WP_0013.pdf
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Bibliographic Info

Paper provided by Dipartimento di Scienze Economiche e Metodi Matematici - Università di Bari in its series series with number 0013.

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Length: 665
Date of creation: Feb 2007
Date of revision: Feb 2007
Handle: RePEc:bai:series:wp0013

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Keywords: Herd behaviour; Run;

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References

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  1. Fiore, Annamaria & Morone, Andrea, 2007. "A Simple Note on Informational Cascades," Economics Discussion Papers 2007-21, Kiel Institute for the World Economy.
  2. Andrea Morone, 2008. "Financial markets in the laboratory: an experimental analysis of some stylized facts," Quantitative Finance, Taylor & Francis Journals, Taylor & Francis Journals, vol. 8(5), pages 513-532.
  3. John D. Hey & Andrea Morone, 2004. "Do Markets Drive Out Lemmings-or Vice Versa?," Economica, London School of Economics and Political Science, London School of Economics and Political Science, vol. 71(284), pages 637-659, November.
  4. 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, University of Chicago Press, vol. 100(5), pages 992-1026, October.
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Cited by:
  1. Morone, Andrea & Sandri, Serena & Fiore, Annamaria, 2009. "On the absorbability of informational cascades in the laboratory," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, Elsevier, vol. 38(5), pages 728-738, October.
  2. Fiore, Annamaria & Morone, Andrea, 2007. "A Simple Note on Informational Cascades," Economics Discussion Papers 2007-21, Kiel Institute for the World Economy.
  3. Giovanni Ferri & Andrea Morone, 2014. "The effect of rating agencies on herd behaviour," Journal of Economic Interaction and Coordination, Springer, Springer, vol. 9(1), pages 107-127, April.

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