Teoria dei Processi Imitativi e Applicazioni Economiche

Abstract

This paper provides a survey of recent theories of herding behaviour, bridging two rather distants strands of literature (roughly, American and European). In the first part of the paper the explanation is based on the idea of asymmetric information and principal-agent approach; these could lead to an over-estimation of public information and under- estimation of private information, leading to informational cascades and interruption of social learning. The second part reviews the second strand of literature on herding, where transition probabilities from one strategy to another, which are stochastic at intividual level, give rise to quasi-deternimistic paths at aggregate level. The concept of self- referential and hetero-referential systems are introduced. Feb. 2004Herd behaviour, informational cascades, asymmetric information, learning, self-organisation, exchange rate, bubbles, financial crises