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Minority Opinion and Herd Behaviour

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Author Info
Sgroi, D.

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Abstract

Is majority opinion a better guide to action than a minority view? This paper demonstrates that a direct application of rational herding theory to this novel area can produce a surprisingly counter-intuitive result: given (i) the minority has a clear conformist view and (ii) decision-makers learn through observation as in a herding model, then size does not matter when evaluating whether some groups make better decisions than others. Extending this further we argue that it may be advantageous for risk averse agents to support a form of positive discrimination, that new generations have a largely ambiguous impact, and that the use of electoral colleges can be supported on informational grounds.

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File URL: http://www.econ.cam.ac.uk/dae/repec/cam/pdf/cwpe0421.pdf
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Publisher Info
Paper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 0421.

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Length: 16
Date of creation: Feb 2004
Date of revision:
Handle: RePEc:cam:camdae:0421

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Web page: http://www.econ.cam.ac.uk/index.htm

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Related research
Keywords: minorities majorities conformity observational learning herding.

Find related papers by JEL classification:
D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
D79 - Microeconomics - - Analysis of Collective Decision-Making - - - Other
D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
D69 - Microeconomics - - Welfare Economics - - - Other

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  1. Annamaria Fiore & Andrea Morone, 2005. "Is playing alone in the darkness sufficient to prevent informational cascades?," Experimental 0503002, EconWPA. [Downloadable!]
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