An agent-based model of the effect of referrals on the stability of systems of satisficing decision makers

We use an agent-based model to examine the influence of word-of-mouth communication in environments where agents select products by using positive referrals from other satisfied agents as well as their own preferences and perceptions. The role of referrals is illustrated using a complex decision environment that incorporates a number of psychological realities. Using the model, we find evidence that word-of-mouth can be an important influence on both system effectiveness and stability depending on defection strategy, and that the ability to learn about others agents’ referral quality leads to consistent improvements in system effectiveness when market barriers are absent, but that these improvements require considerable learning time, and are not present when barriers to change are relatively high.