Information, Reputation and Imitative Choice. A Simple Bayesian Model

How does an agent choose an investment when his private information and the behaviour of other preceding actors are opposed? What are the factors encouraging him to act independently of the behaviour of others, or, on the contrary, to imitate them? We propose an extension of the Bayesian model of Scharfstein and Stein (1990), in order to introduce the informational aspect developed by Bikhcandani, Hirshleifer and Welch (1992) and Orléan (1989, 1990, 1992). Agent B can be induced to imitate an agent or a group of agents A preceding him (i) because the information held by A is more reliable than his own information, (ii) because agent B a priori relies more on agent A than on its own abilities or (iii) because he doesn't want to deviate from A, in order to preserve his reputation. We thus seek to synthesize the informational and reputational approaches in order to better understand their respective importance and relationships in imitative investment choices.