Herding with Heterogeneous Ability: An Application to Organ Transplantation

Stephanie De Mel, Kaivan Munshi (), Soenje Reiche () and Hamid Sabourian
Additional contact information
Stephanie De Mel: Westminster City Council
Kaivan Munshi: Cowles Foundation, Yale University, https://economics.yale.edu/people/faculty/kaivan-munshi
Soenje Reiche: Cowles Foundation, Yale University, https://economics.yale.edu/people/lecturers/soenje-reiche
Hamid Sabourian: University of Cambridge

No 2308, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: There are many economic environments in which an object is offered sequentially to prospective buyers. It is often observed that once the object for sale is turned down by one or more agents, those that follow do the same. One explanation that has been proposed for this phenomenon is that agents making choices further down the line rationally ignore their own assessment of the object's quality and herd behind their predecessors. Our research adds a new dimension to the canonical herding model by allowing agents to di er in their ability to assess the quality of the offered object. We develop novel tests of herding based on this ability heterogeneity and also examine its efficiency consequences, applied to organ transplantation in the U.K. We nd that herding is common but that the information lost due to herding does not substantially increase false discards of good organs or false acceptances of bad organs. Our counter-factual analysis indicates that this is due (in part) to the high degree of heterogeneity in ability across transplant centers. In other settings, such as the U.S., where organ transplantation is organized very differently and the ability distribution will not be the same, the inefficiencies due to herding might well be substantial.

Keywords: Social Learning; Herd behavior; Organ Transplantation; Agent Heterogeneity (search for similar items in EconPapers)
JEL-codes: D82 D83 I11 I18 (search for similar items in EconPapers)
Pages: 48 pages
Date: 2021-10
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