Herding driven by the desire to differ

Abstract

Observational learning often involves congestion: an agent gets lower payoff from an action when more predecessors have taken that action. This preference to act differently from previous agents may paradoxically increase all but one agent's probability of matching the actions of the predecessors. The reason is that when previous agents conform to their predecessors despite the preference to differ, their actions become more informative. The desire to match predecessors' actions may reduce herding by a similar reasoning.