Mimetic Herding Behavior and the Decision to Strategically Default

Michael Seiler (), Mark Lane () and David Harrison ()

The Journal of Real Estate Finance and Economics, 2014, vol. 49, issue 4, 653 pages

Abstract: This study examines the herding behavior of individuals in the context of their willingness to strategically default on a mortgage based on the (falsely) observed behavior of those around them. We find that homeowners are easily persuaded to follow the herd and adopt a strategic default proclivity consistent with that of their peers. Herding behavior is stronger when a Maven, or thought leader, is involved and weaker when the person finds strategic default to be morally objectionable. Homeowners appear to herd more for informational gains rather than for social reasons, and do not herd differentially based on signal strength. In a robustness check using a sample of real estate professionals, the strong mimetic herding result continues to hold. Copyright Springer Science+Business Media, LLC 2014

Keywords: Mimetic herding; Strategic mortgage default; Maven; Signal strength; C83; C93; D19; G01; G02; R20 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (13)

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DOI: 10.1007/s11146-012-9386-8

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