Rational Herds: Economic Models of Social Learning
Cambridge University Press
Edition: illustrated edition, 11/24/2003
EAN 9780521824019, ISBN10: 052182401X
Hardcover, 418 pages, 25.4 x 17.8 x 2.4 cm
Language: English
Penguins jumping off a cliff, economic forecasters and financial advisors speculating against a currency, and farmers using traditional methods in India are all practising social learning. Such learning from the behavior of others may and does lead to herds, crashes, and booms. These issues have become, over the last ten years, an exciting field of research in theoretical and applied economics, finance, and in other social sciences. This book provides both an informal introduction and in-depth insights into the subject. Each chapter is devoted to a separate issue: individuals learn from the observations of actions, the outcomes of these actions, and from what others say. They may delay or make an immediate decision; they may compete against others or gain from cooperation; they make decisions about investment, crop choices, and financial investments. The book highlights the similarities and the differences between the various cases.
1. Introduction
Part I. Social Learning
2. Bayesian tools
3. Social learning with a common memory
4. Cascades and herds
5. Limited memories
6. Delays
7. More delays
8. Outputs
9. Networks and diffusion
10. Words
Part II. Coordination
11. Guessing to coordinate
12. Learning to coordinate
13. Delays and payoff externalities
Part III. Financial Herding
14. Sequences of financial trades
15. Gaussian financial markets
16. Financial frenzies.