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Leading, learning and herding

  • Stone, Daniel F.
  • Miller, Steven J.

We analyze a game theoretic model of social learning about a consumption good with endogenous timing and heterogeneous accuracy of private information. We show that if individuals value their reputation for the degree to which they are informed, this reduces the incentive to learn by observing others and exacerbates the incentive to consume the good before others, i.e., to attempt to be an “opinion leader.” Consequently, reputation concerns reduce the average delay of consumption of new goods and weaken the social information value of early consumption. In an extension, we show that reputation concerns increase the probability of herding on consumption of both high and low quality goods.

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Article provided by Elsevier in its journal Mathematical Social Sciences.

Volume (Year): 65 (2013)
Issue (Month): 3 ()
Pages: 222-231

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Handle: RePEc:eee:matsoc:v:65:y:2013:i:3:p:222-231
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505565

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  17. Banerjee, Abhijit V, 1992. "A Simple Model of Herd Behavior," The Quarterly Journal of Economics, MIT Press, vol. 107(3), pages 797-817, August.
  18. Anderson, Lisa R & Holt, Charles A, 1997. "Information Cascades in the Laboratory," American Economic Review, American Economic Association, vol. 87(5), pages 847-62, December.
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