Controlling the Herd: Applications of Herding Theory
AbstractThe literature on informational cascades and herding theory has for a decade focused on the externality and suboptimal outcomes generated from decision-making when spaces are coarser than private information spaces. Much of the output has therefore been positive, not normative. This paper redresses this imbalance by detailing several direct applications for marketing and business arising from herding theory. We see that business practices such as encouraging early sales, or selling to groups rather than individual customers, can be justified theoretically by direct application of herding theory.
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Bibliographic InfoPaper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 0106.
Date of creation: Jun 2001
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informational cascade; herding; marketing strategies;
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
- L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
- M30 - Business Administration and Business Economics; Marketing; Accounting - - Marketing and Advertising - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2001-06-22 (All new papers)
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