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A simple note on herd behaviour

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Abstract

In his ‘Simple model of herd behaviour’, (Banerjee A (1992) A simple model of herd behaviour. Q J Econ CVII:797–817) shows that—in a sequential game—if the first two players have chosen the same action, player 3 and all subsequent players will ignore his/her own information and start a herd, an irreversible one. In this paper, we analyse the role played by the tie-breaking assumptions in reaching the equilibrium. We show that: players’ strategies are parameter dependent—an incorrect herd may be reversed; a correct herd is irreversible.

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Notes

  1. For applications of Bikhchandeni et al. (1992) model, see Hey and Morone (2004), Morone (2007) and Fiore and Morone (2005, 2007).

  2. For a proof see Morone (2000), and Morone and Samanidou (2006).

References

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  • Hey DH, Morone A (2004) Do markets drive out lemmings—or vice versa? Economica 71(284)

  • Morone A (2000) To herd or not to herd, that is the question?" Economics and Complexity 2(3) Winter 1999–2000, pp. 17–30

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  • Morone A, Samanidou E (2006) A note on herd behaviour. Working paper on Southern Europe Research in Economic Studies—DSE Bari

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Authors and Affiliations

  1. Department of Economics, University of Bari, Via Camillo Rosalba 53, 70125, Bari, Italy

    Andrea Morone

  2. Department of Economics, University of Kiel, Olshausenstrasse 40, 24118, Kiel, Germany

    Eleni Samanidou

Authors
  1. Andrea Morone
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  2. Eleni Samanidou
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Correspondence to Andrea Morone.

Additional information

Eleni Samanidou is now with Deutsche Bundesbank. The opinions expressed in this review are those of the authors, not of the banks.

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Morone, A., Samanidou, E. A simple note on herd behaviour. J Evol Econ 18, 639–646 (2008). https://doi.org/10.1007/s00191-007-0072-6

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  • DOI: https://doi.org/10.1007/s00191-007-0072-6

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