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Herding With and Without Payoff Externalities - An Internet Experiment

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Author Info
Drehmann, Mathias
Oechssler, Jörg
Roider, Andreas

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Abstract

Most real world situations that are susceptible to herding are also characterized by direct payoff externalities. Yet, the bulk of the theoretical and experimental literature on herding has focused on pure informational externalities. In this paper we experimentally investigate the effects of several different forms of payoff externalities (e.g., network effects, first-mover advantage, etc.) in a standard information-based herding model. Our results are based on an internet experiment with more than 6000 subjects, including a subsample of 267 consultants from an international consulting firm. We also replicate and review earlier cascade experiments. Finally, we study reputation effects (i.e., the influence of success models) in the context of herding.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 5310.

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Date of creation: Oct 2005
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Handle: RePEc:cpr:ceprdp:5310

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Related research
Keywords: experiment; herding; information cascades; internet; network effects;

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Find related papers by JEL classification:
C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
D8 - Microeconomics - - Information, Knowledge, and Uncertainty

This paper has been announced in the following NEP Reports:

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Cited by:
(explanations, 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.)

  1. Oechssler, Jörg & Roider, Andreas & Schmitz, Patrick W., 2008. "Cognitive Abilities and Behavioral Biases," Sonderforschungsbereich 504 Publications 08-05, Sonderforschungsbereich 504, Universität Mannheim & Sonderforschungsbereich 504, University of Mannheim. [Downloadable!]
    Other versions:
  2. Schipper, Burkhard C. & Oechssler, Jorg & Duersch, Peter, 2008. "Incentives for Subjects in Internet Experiments," Working Papers 08-1, University of California at Davis, Department of Economics. [Downloadable!]
    Other versions:
  3. Christoph Brunner & Jacob K. Goeree, 2009. "Wise crowds or wise minorities?," IEW - Working Papers iewwp439, Institute for Empirical Research in Economics - IEW. [Downloadable!]
  4. Oechssler, Jörg & Roider, Andreas & Schmitz, Patrick W., 2008. "Cooling-Off in Negotiations - Does It Work?," CEPR Discussion Papers 6807, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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