Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/85805
Authors: 
Swank, Otto H.
Visser, Bauke
Year of Publication: 
2003
Series/Report no.: 
Tinbergen Institute Discussion Paper 03-021/1
Abstract: 
In models of sequential decision making herd behaviour occurs if the signals smart(dumb) agents receive are (un)correlated and if agents have reputational concerns. We show thatintroducing costly effort to become informed about project payoffs (i) eliminates herdbehaviour and (ii) shifts attention from the incentives for agent 2 to herd to agent 1 to exerteffort. While the first agent anticipates the second agent's behaviour, his influence is onlypartial. The unique equilibrium either implies delegation to the first agent; to the secondagent; or has both agents participating.
Subjects: 
Reputation
herd behaviour
information collection.
JEL: 
D72
D82
Document Type: 
Working Paper

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