A Simple Note on Herd Behaviour
SERIES Working Paper No. 13
Posted: 25 May 2011
Abstract
In his "Simple model of herd behaviour", Banerjee (1992) 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 showed that: players' strategies are parameter dependent; an incorrect herd could be reversed; a correct herd is irreversible.
Keywords: Herd behaviour, Run
JEL Classification: D8
Suggested Citation: Suggested Citation
Morone, Andrea and Samanidou, Eleni, A Simple Note on Herd Behaviour. SERIES Working Paper No. 13, Available at SSRN: https://ssrn.com/abstract=1852079