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Informational Herding and Optimal Experimentation

Author

Listed:
  • Smith, L.
  • Sorensen, P.

Abstract

We explore the constrained efficient observational learning model - as when individuals care about successors, or are so induced by an informationlly-constrained social planner. We find that when the herding externality is correctly internalized in this fashion, incorrect herds still obtain. To describe behaviour in this model, we exhibit a set of indices that capture the privately extimated social value of every action.

Suggested Citation

  • Smith, L. & Sorensen, P., 1997. "Informational Herding and Optimal Experimentation," Economics Papers 139, Economics Group, Nuffield College, University of Oxford.
    • Handle: RePEc:nuf:econwp:139
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    Cited by:

    1. Jacob K. Goeree & Thomas R. Palfrey & Brian W. Rogers & Richard D. McKelvey, 2007. "Self-Correcting Information Cascades," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 74(3), pages 733-762.
    2. Matthew Doyle, 2010. "Informational externalities, strategic delay, and optimal investment subsidies," Canadian Journal of Economics, Canadian Economics Association, vol. 43(3), pages 941-966, August.
    3. Alessandro Lizzeri & Marciano Siniscalchi, 2008. "Parental Guidance and Supervised Learning," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 123(3), pages 1161-1195.
    4. Gleason, Kimberly C. & Mathur, Ike & Peterson, Mark A., 2004. "Analysis of intraday herding behavior among the sector ETFs," Journal of Empirical Finance, Elsevier, vol. 11(5), pages 681-694, December.
    5. Christos Koulovatianos & Leonard J. Mirman & Marc Santugini, 2006. "Investment in a Monopoly with Bayesian Learning," Vienna Economics Papers vie0603, University of Vienna, Department of Economics.
    6. 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.
    7. Christos Koulovatianos & Leonard J. Mirman & Marc Santugini, 2006. "Investment in a Monopoly with Bayesian Learning," Vienna Economics Papers 0603, University of Vienna, Department of Economics.

    More about this item

    Keywords

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    JEL classification:

    • C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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