Pack behavior

We analyze a sequential decision model, where every decision maker has her own preferences over actions. Some actions have positive Externalities if a large enough population has previously chosen them, and those Externalities may lead a decision-maker to ignore her own preferred actions to benefit from those Externalities. We give a fairly general sufficient condition such that, on almost every equilibrium path, every decision maker eventually prefers to benefit from group Externalities. We show that this situation, called pack behavior, is observationally equivalent to a herd behavior, but it is triggered by positive Externalities generated by group decision, instead of standard belief-based decisions. We also show that this notion is not ex-ante Pareto-efficient in general.