Herding With and Without Payoff Externalities - An Internet Experiment

Mathias Drehmann, Andreas Roider and Jörg Oechssler

No 5310, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Most real world situations that are susceptible to herding are also characterized by direct payoff externalities. Yet, the bulk of the theoretical and experimental literature on herding has focused on pure informational externalities. In this paper we experimentally investigate the effects of several different forms of payoff externalities (e.g., network effects, first-mover advantage, etc.) in a standard information-based herding model. Our results are based on an internet experiment with more than 6000 subjects, including a subsample of 267 consultants from an international consulting firm. We also replicate and review earlier cascade experiments. Finally, we study reputation effects (i.e., the influence of success models) in the context of herding.

Keywords: Information cascades; Herding; Network effects; Experiment; Internet (search for similar items in EconPapers)
JEL-codes: C92 D8 (search for similar items in EconPapers)
Date: 2005-10
New Economics Papers: this item is included in nep-exp and nep-net
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Herding with and without payoff externalities -- an internet experiment (2007)
Working Paper: Herding with and without Payoff Externalities - An Internet Experiment (2004)
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