Aggregate Uncertainty Can Lead to Incorrect Herds

• 成果类型: Article
• 署名作者: Monzon, Ignacio
• 署名单位: Collegio Carlo Alberto
• 刊物名称: AMERICAN ECONOMIC JOURNAL-MICROECONOMICS
• ISSN/ISSBN: 1945-7669
• DOI: 10.1257/mic.20140212
• 发表日期: 2017
• 页码: 295-314
• 关键词: LAW

摘要

A continuum of homogeneous rational agents choose between two competing technologies. Agents observe a private signal and sample others' previous choices. Signals have an aggregate component of uncertainty, so aggregate behavior does not necessarily reflect the true state of nature. Nonetheless, agents still find others' choices informative, and base their decisions partly on others' behavior. Consequently, bad choices can be perpetuated: aggregate uncertainty makes agents herd on the inferior technology with positive probability. I derive the optimal decision rule when agents sample exactly two individuals. I also present examples with herds on the inferior technology for arbitrarily large sample sizes.