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Herding with collective preferences

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  • S. Ali

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  • Navin Kartik

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Abstract

This paper studies a simple model of observational learning where agents care not only about the information of others but also about their actions. We show that despite complex strategic considerations that arise from forward-looking incentives, herd behavior can arise in equilibrium. The model encompasses applications such as sequential elections, public good contributions, and leadership charitable giving. Copyright Springer-Verlag 2012

Suggested Citation

  • S. Ali & Navin Kartik, 2012. "Herding with collective preferences," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 51(3), pages 601-626, November.
  • Handle: RePEc:spr:joecth:v:51:y:2012:i:3:p:601-626
    DOI: 10.1007/s00199-011-0609-7
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    References listed on IDEAS

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    1. Neeman, Zvika & Orosel, Gerhard O., 1999. "Herding and the Winner's Curse in Markets with Sequential Bids," Journal of Economic Theory, Elsevier, vol. 85(1), pages 91-121, March.
    2. Kreps, David M & Wilson, Robert, 1982. "Sequential Equilibria," Econometrica, Econometric Society, vol. 50(4), pages 863-894, July.
    3. John A. List & David Lucking-Reiley, 2002. "The Effects of Seed Money and Refunds on Charitable Giving: Experimental Evidence from a University Capital Campaign," Journal of Political Economy, University of Chicago Press, vol. 110(1), pages 215-233, February.
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    7. Jay Pil Choi, 1997. "Herd Behavior, the 'Penguin Effect,' and the Suppression of Informational Diffusion: An Analysis of Informational Externalities and Payoff Interdependency," RAND Journal of Economics, The RAND Corporation, vol. 28(3), pages 407-425, Autumn.
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    9. James Andreoni, 2006. "Leadership Giving in Charitable Fund-Raising," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 8(1), pages 1-22, January.
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    11. Steven Callander, 2007. "Bandwagons and Momentum in Sequential Voting," Review of Economic Studies, Oxford University Press, vol. 74(3), pages 653-684.
    12. 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, vol. 100(5), pages 992-1026, October.
    13. Abhijit V. Banerjee, 1992. "A Simple Model of Herd Behavior," The Quarterly Journal of Economics, Oxford University Press, vol. 107(3), pages 797-817.
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    Citations

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    Cited by:

    1. Eddie Dekel Jr. & Michele Piccione Jr., 2014. "The Strategic Dis/advantage of Voting Early," American Economic Journal: Microeconomics, American Economic Association, vol. 6(4), pages 162-179, November.
    2. repec:esx:essedp:706 is not listed on IDEAS
    3. Hummel, Patrick & Holden, Richard, 2014. "Optimal primaries," Journal of Public Economics, Elsevier, vol. 109(C), pages 64-75.
    4. repec:oup:restud:v:84:y:2017:i:2:p:688-717. is not listed on IDEAS
    5. Denter, Philipp & Sisak, Dana, 2015. "Do polls create momentum in political competition?," Journal of Public Economics, Elsevier, vol. 130(C), pages 1-14.
    6. Alex Gershkov & Benny Moldovanu & Xianwen Shi, 2017. "Optimal Voting Rules," Review of Economic Studies, Oxford University Press, vol. 84(2), pages 688-717.
    7. Eyster, Erik & Galeotti, Andrea & Kartik, Navin & Rabin, Matthew, 2014. "Congested observational learning," Games and Economic Behavior, Elsevier, vol. 87(C), pages 519-538.
    8. Christoph March & Anthony Ziegelmeyer, 2016. "Altruistic Observational Learning," CESifo Working Paper Series 5792, CESifo Group Munich.
    9. James C. D. Fisher & John Wooders, 2017. "Interacting information cascades: on the movement of conventions between groups," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 63(1), pages 211-231, January.
    10. Manuel Mueller-Frank & Mallesh M. Pai, 2016. "Social Learning with Costly Search," American Economic Journal: Microeconomics, American Economic Association, vol. 8(1), pages 83-109, February.
    11. Lobel, Ilan & Sadler, Evan, 2015. "Information diffusion in networks through social learning," Theoretical Economics, Econometric Society, vol. 10(3), September.
    12. Hahn, Volker, 2011. "Sequential aggregation of verifiable information," Journal of Public Economics, Elsevier, vol. 95(11), pages 1447-1454.
    13. repec:eee:gamebe:v:104:y:2017:i:c:p:392-410 is not listed on IDEAS
    14. Kohei Kawamura & Vasileios Vlaseros, 2015. "Expert Information and Majority Decisions," ESE Discussion Papers 261, Edinburgh School of Economics, University of Edinburgh.
    15. Kawamura, Kohei & Vlaseros, Vasileios, 2017. "Expert information and majority decisions," Journal of Public Economics, Elsevier, vol. 147(C), pages 77-88.
    16. Davis, Brent J., 2017. "An experiment on behavior in social learning games with collective preferences," Economics Letters, Elsevier, vol. 152(C), pages 93-95.
    17. David Goldbaum, 2016. "Conformity and Influence," Working Paper Series 35, Economics Discipline Group, UTS Business School, University of Technology, Sydney.
    18. Patrick Hummel & Brian Knight, 2015. "Sequential Or Simultaneous Elections? A Welfare Analysis," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 56, pages 851-887, August.
    19. Rainer Schwabe, 2015. "Super Tuesday: campaign finance and the dynamics of sequential elections," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 44(4), pages 927-951, April.
    20. David Goldbaum, 2016. "Networks formation to assist decision making," Working Paper Series 37, Economics Discipline Group, UTS Business School, University of Technology, Sydney.

    More about this item

    Keywords

    Social learning; Observational learning; Herd behavior; Payoff interdependence; Sequential voting; Momentum; D7; D8;

    JEL classification:

    • D7 - Microeconomics - - Analysis of Collective Decision-Making
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty

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