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Classroom Games: Information Cascades

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Author Info

  • Lisa R. Anderson
  • Charles A. Holt

Abstract

This paper describes how to set up a classroom exercise in which students see private signals and make public decisions in sequence. A pattern of conforming decisions in this context is called an information cascade. Once a cascade starts, it is rational for students to ignore their private signals and follow the pattern of previous decisions. This exercise provides an interactive framework that facilitates discussions of Bayes's rule, information, and social conformity.

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/jep.10.4.187
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Bibliographic Info

Article provided by American Economic Association in its journal Journal of Economic Perspectives.

Volume (Year): 10 (1996)
Issue (Month): 4 (Fall)
Pages: 187-193

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Handle: RePEc:aea:jecper:v:10:y:1996:i:4:p:187-93

Note: DOI: 10.1257/jep.10.4.187
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  1. Welch, Ivo, 1992. " Sequential Sales, Learning, and Cascades," Journal of Finance, American Finance Association, vol. 47(2), pages 695-732, June.
  2. McKelvey, Richard D. & Ordeshook, Peter C., 1985. "Elections with limited information: A fulfilled expectations model using contemporaneous poll and endorsement data as information sources," Journal of Economic Theory, Elsevier, vol. 36(1), pages 55-85, June.
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Cited by:
  1. Parkinson, S. & Baddeley, M., 2011. "Group Decision-Making: An Economic Analysis of Social Influence and Individual Difference in Experimental Juries," Cambridge Working Papers in Economics 1128, Faculty of Economics, University of Cambridge.
  2. Baddeley, M. & Burke, C. & Schultz, W. & Tobler, P., 2012. "Herding in Financial Behaviour: A Behavioural and Neuroeconomic Analysis of Individual Differences," Cambridge Working Papers in Economics 1225, Faculty of Economics, University of Cambridge.
  3. Sushil Bikhchandani & David Hirshleifer & Ivo Welch, 1998. "Learning from the Behavior of Others: Conformity, Fads, and Informational Cascades," Journal of Economic Perspectives, American Economic Association, vol. 12(3), pages 151-170, Summer.
  4. Buda, Rodolphe, 2009. "Learning-Testing Process in Classroom: An Empirical Simulation Model," MPRA Paper 12146, University Library of Munich, Germany.
  5. Bogaçhan Çelen & Shachar Kariv, 2004. "Distinguishing Informational Cascades from Herd Behavior in the Laboratory," American Economic Review, American Economic Association, vol. 94(3), pages 484-498, June.

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