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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1051, California Institute of Technology, Division of the Humanities and Social Sciences.
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- 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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