Most real world situations that are susceptible to herding are also characterized by direct payoff externalities. Yet, the bulk of the theoretical and experimental literature on herding has focused on pure informational externalities. In this paper we experi- mentally investigate the effects of...

Lecture on the first SFB/TR 15 meeting, Gummersbach, July, 18 - 20, 2004: We report results of an internet experiment designed to test the theory of informational cascades in financial markets (Avery and Zemsky, AER, 1998). More than 6400 subjects, including a subsample of 267 consultants from...

Most real world situations that are susceptible to herding are also characterized by direct payoff externalities. Yet, the bulk of the theoretical and experimental literature on herding has focused on pure informational externalities. In this paper we experi- mentally investigate the effects of...

We study behavior in an investment experiment conducted with a representative sample of German households. Respondents allocate a fixed budget between a safe asset and a risky asset whose returns are tied to the German stock market and earn monetary returns based on their decisions. Experimental...