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Follow the Leader: Simulations on a Dynamic Social Network

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Abstract

An agent based model is developed in which a social hierarchy of leaders and followers emerges from a uniform or random social network. The formation of the social structure is driven by the desire to be an early adopter of a subsequently popular trend. The environment is related to a majority game, but introduces the importance of the timing of adoption. The proposed environment is relevant to a number of settings in which leadership and timing of decisions are important or being perceived as a trend setter is rewarded. The leadership position can be selfreinforcing. For a professional critic, for example, a cult-of-personality can dictate popular tastes, such as in art, food, and wine markets. A social hierarchy can also apply to the introduction of new products or ideas including academic research and financial market analysts.

Suggested Citation

  • David Goldbaum, 2008. "Follow the Leader: Simulations on a Dynamic Social Network," Working Paper Series 155, Finance Discipline Group, UTS Business School, University of Technology, Sydney.
  • Handle: RePEc:uts:wpaper:155
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    File URL: http://www.finance.uts.edu.au/research/wpapers/wp155.pdf
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    References listed on IDEAS

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    1. William A. Brock & Steven N. Durlauf, 2001. "Discrete Choice with Social Interactions," Review of Economic Studies, Oxford University Press, vol. 68(2), pages 235-260.
    2. W. Brian Arthur, 1994. "Inductive Reasoning, Bounded Rationality and the Bar Problem," Working Papers 94-03-014, Santa Fe Institute.
    3. Colin Camerer & Teck-Hua Ho, 1999. "Experience-weighted Attraction Learning in Normal Form Games," Econometrica, Econometric Society, vol. 67(4), pages 827-874, July.
    4. Arthur, W Brian, 1994. "Inductive Reasoning and Bounded Rationality," American Economic Review, American Economic Association, vol. 84(2), pages 406-411, May.
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    Cited by:

    1. David Goldbaum, 2009. "Follow the Leader: Steady State Analysis of a Dynamic Social Network," Working Paper Series 158, Finance Discipline Group, UTS Business School, University of Technology, Sydney.
    2. repec:eee:aumajo:v:22:y:2014:i:1:p:28-35 is not listed on IDEAS

    More about this item

    Keywords

    dynamic network; social interaction; consumer choice;

    JEL classification:

    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games

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