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Information Aggregation with Random Ordering: Cascades and Overconfidence

Author

Listed:
  • Markus Noth

    (University of Mannheim)

  • Martin Weber

    (University of Mannheim)

Abstract

In economic models, it is usually assumed that agents aggregate their private information with all available public information correctly and completely. In this experiment, we identify subjects" updating procedures and analyse the consequences for the aggregation process. Decisions can be based on private information with known quality and on the observed decisions of other participants. In this setting with random ordering, information cascades are observable and agents" overconfidence has a positive effect on avoiding a non--revealing aggregation process. However, overconfidence reduces welfare in general. Copyright Royal Economic Society 2003.

Suggested Citation

  • Markus Noth & Martin Weber, 2003. "Information Aggregation with Random Ordering: Cascades and Overconfidence," Economic Journal, Royal Economic Society, vol. 113(484), pages 166-189, January.
  • Handle: RePEc:ecj:econjl:v:113:y:2003:i:484:p:166-189
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior

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