Imitation among firms can produce either stable niches or disastrous crowding.

Evidence

Firms and other economic actors do not choose their courses of action in isolation: they monitor each other, and make inferences about the uncertain situation they face by noting the success or failure of others’ strategies. When this leads to diversity to firms selecting different strategies and coming to occupy different “niches” -a stable market structure can result. But if firms imitate, each choosing the same strategy, potentially disastrous “crowding” can occur. — Donald MacKenzie, An Engine, Not a Camera, 1227

Categorization

• XREF: Connects to information-cascade and herding literatures in behavioral finance, and to the book’s broader theme that models become performative through imitation. — connects to: Imitation can suddenly raise cross-asset correlations and defeat diversification. — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 1229; Innovation is modeled as a quasi-volcanic monopoly that erodes with imitation. — Dieter Plehwe, Quinn Slobodian & Philip Mirowski (eds.), Nine Lives of Neoliberalism, 297; Mass competition for uniqueness on uniform platforms undermines the authenticity sought — Naomi Klein, Doppelganger: A Trip into the Mirror…, 135 (+1 more)

Broader Connections

• Imitation-based microstructure can defeat the risk reduction promised by diversification #corroborates (0.92) — Donald MacKenzie, An Engine, Not a Camera, 1089
• Innovation is modeled as a quasi-volcanic monopoly that erodes with imitation. #expands (0.85) — Dieter Plehwe, Quinn Slobodian & Philip Mirowski (eds.), Nine Lives of Neoliberalism, 297
• Imitation can suddenly raise cross-asset correlations and defeat diversification. #complicates (0.82) — Donald MacKenzie, An Engine, Not a Camera, 1229
• Mass competition for uniqueness on uniform platforms undermines the authenticity sought #exemplifies (0.75) — Naomi Klein, Doppelganger, 135