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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- John Hey & Louise Allsopp, .
"Two Experiments to Test a Model of Herd Behaviour,"
99/24, Department of Economics, University of York.
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Games and Economic Behavior,
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- Sgroi, D., 2000. "Optimizing Information in the Herd: Guinea Pigs, Profit and Welfare," Economics Papers 2000-w14, Economics Group, Nuffield College, University of Oxford.
- 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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