Choice and non-coordination behavior in a global and local information setting: a computational approach
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Abstract
This paper studies conformity effects on individual choice when both local and global information are present. A standard discrete choice model that incorporates the social interaction effect to assign choice probabilities to agents is studied. The model is analyzed by using computational simulations. Agents are dispersed in a two dimensional toroidal lattice and they can gather information either from their von Neumann neighbors or from the whole community of agents. Agent heterogeneity is introduced through diversity in private incentives among agents. The main results of the simulations show that the effects of global and local information can produce conflicting informational data streams in agents, making it likely that unstable and volatile aggregate choice emerges. Likewise, the results indicate that the interaction between global and local information affects the shape of the distribution of the size of informational cascades.
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