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On the absorbability of informational cascades in the laboratory

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  • Morone, Andrea
  • Sandri, Serena
  • Fiore, Annamaria

Abstract

This paper aims in investigating the recursive effects of economic theories on the behaviour of bounded rational individuals and tests in the context of informational cascades the absorbability of theories of rational choice among bounded rational decision-makers. A theory is said to be absorbable whenever its logical and prescriptive content is accepted by individuals that choose to act according to it. This accounts for strategic equilibria and can be related to the logic underlying convergence of behaviour and intentional herding in sequential games. This paper discusses the causal role of theories on bounded rational decision-making and analyses in an experimental setting whether providing individuals with theoretical information on informational cascades affects overall probability of herding phenomena to occur as well as whether an incorrect cascade can be reversed. Findings confirm that revealing the theoretical principle of Bayesian optimization improves the degree of social efficiency, enlarges average earnings as well as the percentage of winning per position in the queue.

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  • Morone, Andrea & Sandri, Serena & Fiore, Annamaria, 2009. "On the absorbability of informational cascades in the laboratory," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 38(5), pages 728-738, October.
    • Handle: RePEc:eee:soceco:v:38:y:2009:i:5:p:728-738
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    Cited by:

    1. Morone, Andrea & Nuzzo, Simone, 2016. "Do Markets (Institutions) Drive Out Lemmings or Vice Versa?," MPRA Paper 74322, University Library of Munich, Germany.
    2. Morone, Andrea & Nuzzo, Simone, 2015. "Market Efficiency, Trading Institutions and Information Mirages: evidence from an experimental asset market," MPRA Paper 67448, University Library of Munich, Germany.
    3. Pierdzioch, Christian & Reid, Monique B. & Gupta, Rangan, 2016. "Inflation forecasts and forecaster herding: Evidence from South African survey data," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 62(C), pages 42-50.
    4. Andrea Morone & Simone Nuzzo, 2019. "Market efficiency, trading institutions and information mirages: evidence from a laboratory asset market," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 14(2), pages 317-344, June.
    5. Guido Ferilli & Pier Luigi Sacco & Massimo Buscema & Giorgio Tavano Blessi, 2015. "Understanding Cultural Geography as a Pseudo-Diffusion Process: The Case of the Veneto Region," Economies, MDPI, vol. 3(2), pages 1-28, June.

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