Herding without following the herd: The dynamics of case-based decisions with local interactions

Reference:

Krause, A., 2006. Herding without following the herd: The dynamics of case-based decisions with local interactions. In: Namatame, A., Kaizouji, T. and Aruka, Y., eds. The Complex Networks of Economic Interactions. Vol. 567, Part IV. Springer-Verlag, pp. 179-191. (Lecture Notes in Economics and Mathematical Systems)

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Official URL:

http://dx.doi.org/10.1007/3-540-28727-2_12

Abstract

We use case-based decision theory to evaluate the repeated choices of individuals who are using the experience of a selected set of other individuals over a given time horizon as the basis for their own decisions. It is observed that for certain parameter constellations a large fraction of individuals make identical decisions over a long period of time, which is not implied by the information. The result of this behavior is herding, which, however, has its origin in the way individuals process information rather than a desire to be part of the herd and imitating the behavior of others.

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