Herding and avalanches in binary decision models

The Institute of Economics will hold a seminar meeting as part of its Seminar Series on Tuesday, October 26, 2021: José Moran from Oxford University will present the paper "Herding and avalanches in binary decision models".

Abstract:

In this talk the author will discuss models where agents, faced with two choices, base their decision on some idiosyncratic preference but are also influenced by their peers. The talk will focus on Kirman and Föllmer's celebrated "ant model", showing how its full dynamics can be solved through techniques coming from statistical physics. In particular, it emerges in that model that collective "avalanches", or opinion swings spanning the whole system, can be triggered by a single individual. The author will then show how this approach and solution can help gain insight into the dynamics of fishing boats in the Adriatic sea, where the location in which a boat decides to fish is also determined by some idiosyncratic preference (possibly associated with the amount of fish there) and imitation of its peers. This will be coupled with a stylized model describing the evolution of the population of fish in the sea, showing that the imitative behaviour of the boats can have a detrimental effect on the environment by inducing volatile dynamics in the fish population, roughly characterised by cycles of over- and under-fishing. Finally, the author will discuss how this model relates to the more general issue of ergodicity in the mathematical modelling of economic and social phenomena.

The seminar will be held online at the following link.