Abstract
There are innumerable social and economic situations in which we are influenced in our decision making by what others are doing. Under uncertainty it’s general tendency of an individual to get inspired by decisions of others or mass opinion. However, such herd behavior many times leads to autoregressive affect i.e. output at some moment is weighted average of past few observation. Hence can autoregressive models be used to predict the outcomes in the situations exhibiting such behavior? Studies have already been done on herd behavior in financial market. So, can models used to forecast financial markets be used to predict general decision making under uncertainty. To prove the validity of the point we conduct a small experiment of human decision making under uncertainty and try to forecast future responses using autoregressive models. A group of students were surveyed such that they can also look upon previous responses which would promote herding. A unique financial market type framework is used to quantify the responses and time series models of auto regression are used to forecast mass opinion.
Highlights
ISSN 1913-1844 E-ISSN 1913-1852 www.ccsenet.org/mas other setups, such as those studied in the social learning literature, where there is no price mechanism
This study proposes modeling of human decision making in such a way that option available on a certain issue can be visualized as companies and humans would behave as investors and they have to invest on one single company or a single opinion as trading is done in stock markets
Whole system would behave similar to stock market and it is expected that sudden rise in acceptance of a particular alternative would trigger a surge in its acceptance rate as under circumstances of uncertainty employees would consider the option accepted by most others
Summary
There are innumerable social and economic situations in which we are influenced in our decision making by what others are doing. It is difficult to determine whether traders make similar decisions because they disregard their own information and imitate or because they are reacting to the same piece of public information, for instance To overcome this problem, some authors (Cipriani and Guarino, 2005; Drehman et al, 2005) have tested herd behavior in a laboratory financial market. In the laboratory one can observe the private information that subjects have when making their decisions, so it is possible to test models of herding directly. This study proposes modeling of human decision making in such a way that option available on a certain issue can be visualized as companies and humans would behave as investors and they have to invest on one single company or a single opinion as trading is done in stock markets. Result will tell about percentage of population who want to be employed in New Delhi
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