Herd Design

22 Pages Posted: 7 Sep 2021

See all articles by Itai Arieli

Itai Arieli

Technion-Israel Institute of Technology

Ronen Gradwohl

Ariel University

Rann Smorodinsky

Technion-Israel Institute of Technology - The William Davidson Faculty of Industrial Engineering & Management

Date Written: September 5, 2021

Abstract

The classical herding model examines the asymptotic behavior of agents who observe their predecessors' actions as well as a private signal from an exogenous information structure. In this paper, we introduce a self-interested sender into the model and study her problem of designing this information structure. If agents cannot observe each other the model reduces to the Bayesian persuasion framework. However, when the agents do observe predecessors' actions, they may learn from each other, possibly lowering the sender's utility. We identify necessary and sufficient conditions under which the sender can nevertheless obtain the same utility as when the agents are unable to observe each other.

Keywords: Bayesian Persuasion, Herding

Suggested Citation

Arieli, Itai and Gradwohl, Ronen and Smorodinsky, Rann, Herd Design (September 5, 2021). Available at SSRN: https://ssrn.com/abstract=3917729 or http://dx.doi.org/10.2139/ssrn.3917729

Itai Arieli (Contact Author)

Technion-Israel Institute of Technology ( email )

Technion City
Haifa 32000, Haifa 32000
Israel

Ronen Gradwohl

Ariel University ( email )

Ariel, 40700
Israel

HOME PAGE: http://https://roneng.weebly.com/

Rann Smorodinsky

Technion-Israel Institute of Technology - The William Davidson Faculty of Industrial Engineering & Management ( email )

Haifa 32000
Israel

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