A Simple Note on Informational Cascades
AbstractSeminal models of herd behaviour and informational cascades point out existence of negative information externalities, and propose to ?destroy? information in order to achieve social improvements. Although in the last years many features of herd behaviour and informational cascades have been studied, this particular aspect has never been extensively analysed. In this article we try to fill this gap, investigating both theoretically and experimentally whether and to which extent destroying information can improve welfare. Our empirical results show that this decisional mechanism actually leads to a behaviour more consistent with the theory that in turn produces the predicted efficiency gain. --
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Kiel Institute for the World Economy in its series Economics Discussion Papers with number 2007-21.
Date of creation: 2007
Date of revision:
Informational cascades; information externality; individual decision making; experiment;
Other versions of this item:
- Fiore, Annamaria & Morone, Andrea, 2008. "A Simple Note on Informational Cascades," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy, vol. 2(1), pages 1-21.
- C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
- D62 - Microeconomics - - Welfare Economics - - - Externalities
This paper has been announced in the following NEP Reports:
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.:
- Andrea Morone & Eleni Samanidou, 2008.
"A simple note on herd behaviour,"
Journal of Evolutionary Economics,
Springer, vol. 18(5), pages 639-646, October.
- Anderson, Lisa R & Holt, Charles A, 1997. "Information Cascades in the Laboratory," American Economic Review, American Economic Association, vol. 87(5), pages 847-62, December.
- Jeffrey M Wooldridge, 2002.
"Simple solutions to the initial conditions problem in dynamic, nonlinear panel data models with unobserved heterogeneity,"
CeMMAP working papers
CWP18/02, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
- Jeffrey M. Wooldridge, 2005. "Simple solutions to the initial conditions problem in dynamic, nonlinear panel data models with unobserved heterogeneity," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 20(1), pages 39-54.
- Gary S. Becker, 1991.
"A Note on Restaurant Pricing and Other Examples of Social Influences on Price,"
University of Chicago - George G. Stigler Center for Study of Economy and State
67, Chicago - Center for Study of Economy and State.
- Becker, Gary S, 1991. "A Note on Restaurant Pricing and Other Examples of Social Influences on Price," Journal of Political Economy, University of Chicago Press, vol. 99(5), pages 1109-16, October.
- Banerjee, Abhijit & Fudenberg, Drew, 2004.
Games and Economic Behavior,
Elsevier, vol. 46(1), pages 1-22, January.
- Sushil Bikhchandani & David Hirshleifer & Ivo Welch, 2010.
"A theory of Fads, Fashion, Custom and cultural change as informational Cascades,"
Levine's Working Paper Archive
1193, David K. Levine.
- Bikhchandani, Sushil & Hirshleifer, David & Welch, Ivo, 1992. "A Theory of Fads, Fashion, Custom, and Cultural Change in Informational Cascades," Journal of Political Economy, University of Chicago Press, vol. 100(5), pages 992-1026, October.
- Andrea Morone, 2002.
"Financial Market in the Laboratory,"
Computing in Economics and Finance 2002
151, Society for Computational Economics.
- Allsopp, L. & Hey, J.D., 1998.
"Two Experiments to Test a Model of Herd Behaviour,"
98-28, Department of Economics, University of Birmingham.
- Pastine, Ivan & Pastine, Tuvana, 2005.
"Signal Accuracy and Informational Cascades,"
CEPR Discussion Papers
5219, C.E.P.R. Discussion Papers.
- Annamaria Fiore & Andrea Morone, 2005.
"Is playing alone in the darkness sufficient to prevent informational cascades?,"
Papers on Strategic Interaction
2005-09, Max Planck Institute of Economics, Strategic Interaction Group.
- Annamaria Fiore & Andrea Morone, 2005. "Is playing alone in the darkness sufficient to prevent informational cascades?," Experimental 0503002, EconWPA.
- Selten, Reinhard & Joachim Buchta, 1994. "Experimental Sealed Bid First Price Auctions with Directly Observed Bid Functions," Discussion Paper Serie B 270, University of Bonn, Germany.
- John D. Hey & Andrea Morone, 2004. "Do Markets Drive Out Lemmings-or Vice Versa?," Economica, London School of Economics and Political Science, vol. 71(284), pages 637-659, November.
- Andrea Morone & Giovanni Ferri, 2008.
"The Effect of Rating Agencies on Herd Behaviour,"
0022, Dipartimento di Scienze Economiche e Metodi Matematici - Università di Bari, revised Nov 2008.
- Andrea Morone & Eleni Samanidou, 2007.
"A simple note on Herd Behaviour,"
0013, Dipartimento di Scienze Economiche e Metodi Matematici - Università di Bari, revised Feb 2007.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ZBW - German National Library of Economics).
If references are entirely missing, you can add them using this form.