The Right Choice at the Right Time: a Herding Experiment in Endogenous Time
This paper examines experimental evidence relating to herd behaviour in situations when subjects can learn from each other, and can delay their decision. Subject acted rationally, gaining from observational learning, despite penalties for delay. Cascades were ubiquitous and reverse-cascades occurred in which incorrect decisions made by early decision-makers produced herds on the incorrect choice. The major departure from rationality came when subjects realized they had chosen incorrectly despite following the majority view.
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- Angela A. Hung & Charles R. Plott, 2001.
"Information Cascades: Replication and an Extension to Majority Rule and Conformity-Rewarding Institutions,"
American Economic Review,
American Economic Association, vol. 91(5), pages 1508-1520, December.
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- Allsopp, L. & Hey, J.D., 1998.
"Two Experiments to Test a Model of Herd Behaviour,"
98-28, Department of Economics, University of Birmingham.
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"Optimizing Information in the Herd: Guinea Pigs, Profits, and Welfare,"
Games and Economic Behavior,
Elsevier, vol. 39(1), pages 137-166, April.
- Sgroi, D., 2000. "Optimizing Information in the Herd: Guinea Pigs, Profit and Welfare," Economics Papers 2000-w14, Economics Group, Nuffield College, University of Oxford.
- Sushil Bikhchandani & David Hirshleifer & Ivo Welch, 1998. "Learning from the Behavior of Others: Conformity, Fads, and Informational Cascades," Journal of Economic Perspectives, American Economic Association, vol. 12(3), pages 151-170, Summer.
- Welch, Ivo, 1992. " Sequential Sales, Learning, and Cascades," Journal of Finance, American Finance Association, vol. 47(2), pages 695-732, June.
- 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.
- Akerlof, George A & Yellen, Janet L, 1987. "Rational Models of Irrational Behavior," American Economic Review, American Economic Association, vol. 77(2), pages 137-42, May.
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