Understanding (Ir)rational Herding Online

Henry Kudzanai Dambanemuya, Johannes Wachs, Emőke Ágnes Horvát*

*Corresponding author for this work

Research output: Chapter in Book/Report/Conference proceedingConference contribution

Abstract

Investigations of social influence in collective decision-making have become possible due to recent technologies and platforms that record interactions in much larger groups than could be studied before. Herding and its impact on decision-making are critical areas of practical interest and research study. However, despite theoretical work suggesting that it matters whether individuals choose who to imitate based on cues such as experience or whether they herd at random, there is little empirical analysis of this distinction. To demonstrate the distinction between what the literature calls “rational” and “irrational” herding, we use data on tens of thousands of loans from a well-established online peer-to-peer (p2p) lending platform. First, we employ an empirical measure of memory in complex systems to quantify herding in lending. Then, we illustrate a network-based approach to visualize herding. Finally, we model the impact of herding on collective outcomes. Our study reveals that loan performance is not solely determined by whether lenders engage in herding or not. Instead, the interplay between herding and the imitated lenders' prior success on the platform predicts loan outcomes. In short, herding around expert lenders is associated with loans that do not default. We discuss the implications of this under-explored aspect of herding for platform designers, borrowers, and lenders. Our study advances collective intelligence theories based on a case of high-stakes group decision-making online.

Original languageEnglish (US)
Title of host publicationProceedings of the ACM Collective Intelligence Conference, CI 2023
PublisherAssociation for Computing Machinery, Inc
Pages79-88
Number of pages10
ISBN (Electronic)9798400701139
DOIs
StatePublished - Nov 6 2023
Event2023 ACM Collective Intelligence Conference, CI 2023 - Delft, Netherlands
Duration: Nov 7 2023Nov 9 2023

Publication series

NameProceedings of the ACM Collective Intelligence Conference, CI 2023

Conference

Conference2023 ACM Collective Intelligence Conference, CI 2023
Country/TerritoryNetherlands
CityDelft
Period11/7/2311/9/23

Keywords

  • collective intelligence
  • crowdsourcing
  • herding
  • social influence

ASJC Scopus subject areas

  • Software
  • Artificial Intelligence
  • Computer Networks and Communications
  • Computer Science Applications

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