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Follow the Leader: Steady State Analysis of a Dynamic Social Network

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Abstract

A social pyramid is show to be the unique steady state social structure when agents gain utility from being early adopters of subsequently popular trends. The environment is related to a majority game, but introduces the importance of the timing of adoption. Utility derived from making a popular choice independent of timing is demonstrated as essential to support the hierarchy. The proposed environment is relevant to a number of settings in which leadership and timing of decisions are important or where being perceived as a trend setter is rewarded. The leadership position can be self-reinforcing. 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, 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.
  • Handle: RePEc:uts:wpaper:158
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    File URL: http://www.finance.uts.edu.au/research/wpapers/wp158.pdf
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    Keywords

    dynamic network; social interaction; consumer choice;

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