Using neurological evidence to differentiate between informational and social herding among strategic mortgage defaulters

Michael J. Seiler, Eric Walden

Research output: Contribution to journalArticlepeer-review

7 Scopus citations

Abstract

Great debate is being waged between whether strategic mortgage defaulters follow a herd for social reasons or mimic others’ behavior for informational gain. Using functional magnetic resonance imaging (fMRI), the latest neurological technology allowing for observation of brain activity during strategic mortgage default decision-making, we find that when defaulters learn of peer default behavior, they acknowledge the social component of the decision, but feel freer to make their own decisions. Alternatively, when observing the behavior of a maven (real estate expert), borrowers still consider the social aspect of the decision (although to a lesser extent), but ultimately follow the maven who presumably possesses a greater information set. Alarmingly, borrowers only significantly follow the herd when mavens advocate strategic default, not when they recommend against it.

Original languageEnglish
Pages (from-to)453-471
Number of pages19
JournalJournal of Real Estate Research
Volume38
Issue number3
StatePublished - 2016

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