In general economic theory, there is a theory called
herding or
information cascade.
It is a popular research subject among finance people, marketing people
and economists.
During our daily life, it is very costly to make lots of decisions.
Take real estate for example, people need to do lots of research before
a decison is finally made.
- First, people need to decide when to make a purchase;
- Then decide which town to go with, including how long to
commute daily, which school to send kids to, etc;
- Choose to buy with a real agent or work on your own;
- If agents, which agent to go with. There are many agents in
this industry but like any other industry, good agents are very rare;
- Then, among all all possible houses, people need to shrink
them to a size that is easy to work wity, say less than 10 houses;
- Among those 10 houses, pick one. This is the most difficult
and costly decison.
In one word, most economic decisions are costly decisions. We human
being are very smart. When making such decisons, some people find a
much "cheaper" way. We look around people like us and then just "
copy and paste" what
they do.Thus,
A makes a decison;
B follows A;
C follows B;
and so on.
Finallly, a group of people might make very similar decisions.
A good thing? Bad thing?
Hard to say. But it is an economic phenomena that has been studied by
many people.
Now back to real estate. Specifically, houses.
When people talk about cities, usually, we immediately have an image of
houses that dense and lack of maintenance.Providence is just among one
of them. Most areas are like this. Friday, I was at East Side of
Providence, RI. We realtors are allowed to judge a community. So I
would not say it is good or bad. But this community is so different.
Yards are green and clean. Roofs are like new. Walls are sharp.
Everything is just so good.
There are many reasons that make East Side is what is today. Close to
Brown. near the water, etc. But Herding must be one of the reasons.
When people think about better places to live in Providence, all they
hear is East Side.
This is a perfect example of Herding.
Now how about herding with a good agent? I need to see a good example
of a residential agent as well as a commercial agent.
;)
;)
