Does Cascade Behavior Reflect Bayesian Updating? –An Experimental Study--
AbstractWe examine the explanatory power of cascade models by implementing the BDM-mechanism in a simple cascade experiment in which subject have to decide on the prediction of a randomly chosen urn. Assigned price limits to participate in the prediction game are used as indicators of subjective probabilities. We are thus able to test the explanatory power of the standard BHW model (Bickchandani, Hirshleifer and Welch, 1992) in comparison to cascade models which incorporate individual decision errors. Focusing on stated price limits corresponding to urn predictions in line with both, standard and error BHW models our data indicate that the inclusion of errors does not significantly improve the explanatory power of the standard approach.
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Bibliographic InfoPaper provided by Max Planck Institute of Economics, Strategic Interaction Group in its series Papers on Strategic Interaction with number 2003-01.
Length: 27 pages
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Find related papers by JEL classification:
- D92 - Microeconomics - - Intertemporal Choice and Growth - - - Intertemporal Firm Choice and Growth, Financing, Investment, and Capacity
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
This paper has been announced in the following NEP Reports:
- NEP-ALL-2003-03-10 (All new papers)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Anderson, Lisa R. & Holt, Charles A., 2008. "Information Cascade Experiments," Handbook of Experimental Economics Results, Elsevier.
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