EconPapers    
Economics at your fingertips  
 

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

Daniel Sgroi

Experimental Economics, 2003, vol. 6, issue 2, 159-180

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. Copyright Kluwer Academic Publishers 2003

Keywords: learning; herding; delay (search for similar items in EconPapers)
Date: 2003
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (24) Track citations by RSS feed

Downloads: (external link)
http://hdl.handle.net/10.1023/A:1025357004821 (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: The Right Choice at the Right Time: a Herding Experiment in Endogenous Time (2000)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:expeco:v:6:y:2003:i:2:p:159-180

Ordering information: This journal article can be ordered from
http://www.springer. ... ry/journal/10683/PS2

Access Statistics for this article

Experimental Economics is currently edited by David J. Cooper, Lata Gangadharan and Charles N. Noussair

More articles in Experimental Economics from Springer, Economic Science Association Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla ().

 
Page updated 2019-05-29
Handle: RePEc:kap:expeco:v:6:y:2003:i:2:p:159-180