The Hindu Business Line : Ants and positive feedback

YOU may have noticed a street full of shops selling only, say, paper and related products, or a road with just cinema theatres. Have you ever wondered what drives such behaviour?

Economists have studied such behaviour by observing ant groups! Suppose you drop lumps of sugar in two adjacent areas. If you are a student of statistics, you may expect the ants to divide themselves between the two food areas. This is because there is no reason why ants should prefer one food area to the other.

But you may be surprised to find that the train of ants moves toward only one food area. Why? The behaviour of individual ants influences the group. The first ant may randomly choose one location. Its decision may influence others that follow.

Such behaviour is said to have "positive feedback". This essentially means that an initial action is magnified many times over. The choice of the first ant, the initial action, resulted in a train of ants following suit, which magnifies the initial action.

You and I are not very different from the ants. Suppose you decide to buy an audio system, but are uncertain about the brand. You are most likely to buy the brand your friend has. You are, therefore, influenced by the choices of other people, just as ants are. Economists study such behaviour as part of the interacting agent models.

That is also the reason why Bangalore first housed all software companies in India, as did the Silicon Valley in the US. Or why a particular street has all shops selling paper products. A businessman may have randomly selected a street to establish his shop. As consumers of paper products flock to that street, other businessmen wanting to sell paper may also think it fit to set shop there. And so goes the positive feedback.

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