Optimizing Information in the Herd: Guinea Pigs, Profit and Welfare
Economics Papers from Economics Group, Nuffield College, University of Oxford
Herding arises when an agent's private informationis swamped by public information in what Jackson and Kalai (1997) call a recurring game. The agent will fail to reveal his own information and will follow the actions of his predecessor and, as a result, useful information is lost, which might have highlighted a better choice for later decision-makers. This paper evaluates the strategy of forcing a sub-set of agents to make their decision early from the perspective of a social planner, and a firm with a valuable or valueless procuct. Promotional activity by firms can be explained as an attemps to overcome the herd externality and maximize sales.
Keywords: HERDING; INFORMATIONAL CASCADES; LEARNING; SOCIAL WELFARE; PROMOTIONAL COMPAIGNS (search for similar items in EconPapers)
JEL-codes: D82 D83 L15 (search for similar items in EconPapers)
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Journal Article: Optimizing Information in the Herd: Guinea Pigs, Profits, and Welfare (2002)
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Persistent link: https://EconPapers.repec.org/RePEc:nuf:econwp:2000-w14
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