Cookies?
Library Header Image
LSE Research Online LSE Library Services

Naïve herding in rich-information settings

Eyster, Erik and Rabin, Matthew (2010) Naïve herding in rich-information settings. American Economic Journal: Microeconomics, 2 (4). pp. 221-243. ISSN 1945-7669

Full text not available from this repository.

Abstract

In social-learning environments, we investigate implications of the assumption that people naïvely believe that each previous person's action reflects solely that person's private information. Naïve herders inadvertently over-weight early movers' private signals by neglecting that interim herders' actions also embed these signals. Such "social confirmation bias" leads them to herd with positive probability on incorrect actions even in extremely rich-information settings where rational players never do. Moreover, because they become fully confident even when wrong, naïve herders can be harmed, on average, by observing others.

Item Type: Article
Official URL: http://www.aeaweb.org/aej-micro/index.php
Additional Information: © 2010 American Economic Association
Library of Congress subject classification: H Social Sciences > HB Economic Theory
Journal of Economic Literature Classification System: D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D82 - Asymmetric and Private Information
D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D83 - Search; Learning; Information and Knowledge; Communication; Belief
Sets: Departments > Economics
Collections > Economists Online
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Date Deposited: 14 Feb 2012 11:29
URL: http://eprints.lse.ac.uk/41889/

Actions (login required)

Record administration - authorised staff only Record administration - authorised staff only