TY - GEN
T1 - Herding behavior as a network externality
AU - Burtch, Gordon
PY - 2011
Y1 - 2011
N2 - Crowd-funding markets have recently emerged as a new avenue for entrepreneurs to raise funds. In these markets, any individual can pitch ideas and interested others can then invest in them. These markets provide investors with rich information on the investment decisions of prior others, thus they are rife with the potential for social influence. With this in mind, I examine a crowd-funded market for fashion, empirically evaluating some implications of Banerjee's "simple model of herd behavior." Specifically, I examine the implication that an increase in the number of observable decision makers within a marketplace should drive an increase in herding, because a greater number of inexperienced deciders will lower the average level of private knowledge in the market. I find evidence that supports this notion. Further, I identify a negative association between herding and the optimality of investor decision-making, supporting the characterization ofherding as a negative network externality.
AB - Crowd-funding markets have recently emerged as a new avenue for entrepreneurs to raise funds. In these markets, any individual can pitch ideas and interested others can then invest in them. These markets provide investors with rich information on the investment decisions of prior others, thus they are rife with the potential for social influence. With this in mind, I examine a crowd-funded market for fashion, empirically evaluating some implications of Banerjee's "simple model of herd behavior." Specifically, I examine the implication that an increase in the number of observable decision makers within a marketplace should drive an increase in herding, because a greater number of inexperienced deciders will lower the average level of private knowledge in the market. I find evidence that supports this notion. Further, I identify a negative association between herding and the optimality of investor decision-making, supporting the characterization ofherding as a negative network externality.
KW - Crowd-funding
KW - Electronic commerce
KW - Herding behavior
KW - Network effects
UR - http://www.scopus.com/inward/record.url?scp=84884628474&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=84884628474&partnerID=8YFLogxK
M3 - Conference contribution
AN - SCOPUS:84884628474
SN - 9781618394729
T3 - International Conference on Information Systems 2011, ICIS 2011
SP - 1061
EP - 1076
BT - International Conference on Information Systems 2011, ICIS 2011
T2 - 32nd International Conference on Information System 2011, ICIS 2011
Y2 - 4 December 2011 through 7 December 2011
ER -