NDLI: The Right Choice at the Right Time: A Herding Experiment in Endogenous Time

Content Provider	Springer Nature Link
Author	Sgroi, Daniel
Copyright Year	2003
Abstract	Herding describes the phenomenon in decision-making where an economic agent disregards his own private information to follow the actions of his predecessors as in Banerjee (1992). With later decision-makers simply copying earlier decisions their private information cannot be inferred by other decision-makers and will be forever lost. There is some experimental evidence on simple sequential herding of this type in the literature, notably Anderson and Holt (1997). This paper differs by allowing subjects to delay their decision-making in order to benefit from observing others' actions as in more recent herding models such as Chamley and Gale (1994). The results in this paper suggest that subjects will indeed delay when their private information is not sufficiently strong. Despite this ability to wait, as predicted in the theoretical literature, cascades remained ubiquitous and more worrying still, reverse-cascades occurred in which incorrect decisions made by early decision-makers produced informational cascades on the wrong action. In an alternative design, informing subjects that they had made incorrect choices only made matters worse as subjects moved further away from rational behavior.
Starting Page	159
Ending Page	180
Page Count	22
File Format	PDF
ISSN	13864157
Journal	Experimental Economics
Volume Number	6
Issue Number	2
e-ISSN	15736938
Language	English
Publisher	Kluwer Academic Publishers
Publisher Date	2003-01-01
Publisher Place	Boston
Access Restriction	One Nation One Subscription (ONOS)
Subject Keyword	Economic Theory Microeconomics Public Finance & Economics Methodology and the History of Economic Thought Operation Research/Decision Theory
Content Type	Text
Resource Type	Article
Subject	Economics, Econometrics and Finance

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