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Helpful laymen in informational cascades

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  • Wu, Jiemai

Abstract

This paper extends Bikhchandani, Hirshleifer and Welch's informational cascade model by introducing two types of players, experts with high signal accuracy and laymen with low signal accuracy. Assuming players randomize when indifferent, if a small enough group of laymen are present in the population, the probability of having a correct cascade is strictly higher than if no laymen are present. The same result is robust to almost every tie-breaking rule.

Suggested Citation

  • Wu, Jiemai, 2015. "Helpful laymen in informational cascades," Journal of Economic Behavior & Organization, Elsevier, vol. 116(C), pages 407-415.
    • Handle: RePEc:eee:jeborg:v:116:y:2015:i:c:p:407-415
    DOI: 10.1016/j.jebo.2015.05.002
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    References listed on IDEAS

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    1. Pastine, Tuvana & Pastine, Ivan, 2005. "Signal Accuracy and Informational Cascades," CEPR Discussion Papers 5219, C.E.P.R. Discussion Papers.
    2. Daron Acemoglu & Munther A. Dahleh & Ilan Lobel & Asuman Ozdaglar, 2011. "Bayesian Learning in Social Networks," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 78(4), pages 1201-1236.
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    12. 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.
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    Cited by:

    1. James C. D. Fisher & John Wooders, 2017. "Interacting information cascades: on the movement of conventions between groups," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 63(1), pages 211-231, January.

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    More about this item

    Keywords

    Informational cascades; Bayesian learning; Heterogeneous signal accuracy;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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