THE EFFECT OF NETWORK TYPES ON HERD BEHAVIOR

Humans are social beings and opinions of people around them has a significant impact on their decisions. Often, under scarcity of information, people observe the behavior of others and imitate them, that is, they resort to group behavior. Existing literature on the influence of a group suggests that a small number of individuals do indeed influence decisions of majority. This is evident from the process of spread of new technologies in agriculture, improved seeds and pesticides, dissemination of innovations, patterns of digital markets and spread of using new medicines among doctors. Mathematical models of graph theory are used for the analysis of economic or other relations. The use of graphs to study economic problems is a fairly new, albeit rapidly growing direction in research. A particular network of connections is represented by nodes (individuals) and edges (connections). For example, below is a graph that represents a network of peers’ connections at the university. These 10 nodes correspond to 10 students, and the 14 edges are for friendships between them. According to this network, student 1 befriends 2 and 4, while student 3 befriends 2, 5, 6 and 9. It is possible to analyze public opinion formation, social training, investor behavior and many other interesting issues with similar graphs.