Mimetic Herding Behavior and the Decision to Strategically Default

48 Pages Posted: 3 Jul 2011 Last revised: 28 Aug 2012

See all articles by Michael Seiler

Michael Seiler

College of William and Mary - Finance

Mark Lane

affiliation not provided to SSRN

David Harrison

Texas Tech University

Multiple version iconThere are 2 versions of this paper

Date Written: September 21, 2011

Abstract

This study examines the herding behavior of individuals in the context of their willingness to strategically default on a mortgage based on the (falsely) observed behavior of those around them. We find that homeowners are easily persuaded to follow the herd and adopt a strategic default proclivity consistent with that of their peers. Herding behavior is stronger when a maven, or thought leader, is involved and weaker when the person finds strategic default to be morally objectionable. Homeowners appear to herd more for informational gains rather than for social reasons, and do not herd differentially based on signal strength. In a robustness check using a sample of real estate professionals, the strong mimetic herding result continues to hold.

Keywords: Mimetic Herding, Information Cascades, Strategic Mortgage Default, Maven

Suggested Citation

Seiler, Michael and Lane, Mark and Harrison, David, Mimetic Herding Behavior and the Decision to Strategically Default (September 21, 2011). Available at SSRN: https://ssrn.com/abstract=1876203 or http://dx.doi.org/10.2139/ssrn.1876203

Michael Seiler (Contact Author)

College of William and Mary - Finance ( email )

VA
United States

HOME PAGE: http://mason.wm.edu/faculty/directory/seiler_m.php

Mark Lane

affiliation not provided to SSRN ( email )

David Harrison

Texas Tech University ( email )

2500 Broadway
Lubbock, TX 79409
United States

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