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Learning from the Behavior of Others: Conformity, Fads, and Informational Cascades

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  • Sushil Bikhchandani
  • David Hirshleifer
  • Ivo Welch

Abstract

Learning by observing the past decisions of others can help explain some otherwise puzzling phenomena about human behavior. For example, why do people tend to converge on similar behavior? Why is mass behavior prone to error and fads? The authors argue that the theory of observational learning, and particularly of informational cascades, has much to offer economics, business strategy, political science, and the study of criminal behavior.

Suggested Citation

  • 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.
    • Handle: RePEc:aea:jecper:v:12:y:1998:i:3:p:151-70
    Note: DOI: 10.1257/jep.12.3.151
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    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/jep.12.3.151
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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