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Two Experiments to Test a Model of Herd Behaviour

Published online by Cambridge University Press:  14 March 2025

Louise Allsopp  and
John D. Hey
Louise Allsopp*
Affiliation:
School of Economics, University of Adelaide, Adelaide, Australia, 5005
John D. Hey*
Affiliation:
Department of Economics, University of York, Heslington, York, YO1 5DD, Great Britain
*
email: louise.allsopp@adelaide.edu.au
email: jdh1@york.ac.uk
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Abstract

We carry out two experiments to test a model of herd behaviour based on the work of Banerjee (Quarterly Journal of Economics, CVII, 797-817,1992). He shows that herding occurs as a result of people observing the actions of others and using this information in their own decision rule. In our experiments herding does not occur as frequently as Banerjee predicts. Contrary to his results, the subjects’ behaviour appears to depend on the probabilities of receiving a signal and of this signal being correct. Furthermore, Banerjee finds that the pattern of decision making over a number of rounds of the game is volatile whereas we find that decision making is volatile within rounds.

Keywords

herd behaviourexperimentsdecision making

JEL classification

C91: Laboratory, Individual Behavior C92: Laboratory, Group Behavior

Information

Type
Research Article
Information
Experimental Economics , Volume 3 , Issue 2 , October 2000 , pp. 121 - 136
Copyright
Copyright © 2000 Economic Science Association

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Footnotes

*

Author to whom correspondence should be addressed.

References

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