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Should I stay or should I go? Bandwagons in the lab

Heggedal, Tom-Reiel; Helland, Leif; Joslin, Knut-Eric Neset
Journal article, Peer reviewed
Accepted version
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Locked until 26.04.2021 due to copyright restrictions (Locked)
URI
http://hdl.handle.net/11250/2559263
Date
2018
Metadata
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  • Publikasjoner fra CRIStin - BI [643]
  • Scientific articles [1357]
Original version
Journal of Economic Behavior and Organization. 2018, 150(June), 86-97.   10.1016/j.jebo.2018.03.019
Abstract
We experimentally investigate the impact of strategic uncertainty and complementarity on leader and follower behavior using the model of Farrell and Saloner (1985). At the core of the model are endogenous timing, irreversible actions and private valuations. We find that strategic complementarity strongly determines follower behavior. Once a subject decides to abandon the status quo the probability that other players jump on the bandwagon increases sharply. However, there is a reluctance to lead when leading is a conditional best response. We explain this deviation from the neo-classical equilibrium by injecting some noise in the equilibrium concept. We also find that cheap talk improves efficiency.
Publisher
Elsevier
Journal
Journal of Economic Behavior and Organization

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